B    3    115    =^73 

PROFIT    SHARING 

BY    AMERICAN 

EMPLOYERS 


Percentage  of  Profits 
Special  Distributions 
Stock  for  Wage-Earners 
Exceptional  -Abandoned- 
Proposed    Plans 


EXAMPLES /row  ENGLAND 
TYPES  in  FRANCE 


Welfare  Department 

The   National   Civic   Federation 

Headquarters:  Thirty-third  Floor 

Metropolitan  Tower 

New  York  City 


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Educational  Movement  to  Secure  Improvements  in  Working  and  Living  Conditions  of 

Wage  Earners  by  Employers. 


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DEPARTMENT  EXECUTIVE  COUNCIL 


LOUIS  A.  COOLIDGE. 

Chairman 

CYRUS  H.  McCORMICK. 
1st  Vice-Chairman 

EMERSON  McMILLIN. 
2nd  Vice-Chairman 

PERCY  S.  STRAUS. 
Srd  Vice-Chairman 

ISAAC  N.  SELIGMAN. 
Treasurer 

MISS  GERTRUDE  BEEKS. 
Director 


WILLIAM  R.  WILLCOX. 

Chairman  Pension  Department 

W.  G.  MATHER. 

Chairman   National  Survey   Welfare 
Committee 

W.  L.  SAUNDERS. 

Chairman  New  Yor/i  Welfare  Committee 

LESLIE  GRAFF. 

Chairman  Welfare  Exhibit  Committee 

DR.  EDWARD  K.  DUNHAM. 

Chairman  Comparative  Food  Values 
Committee 

MISS  MARY  G.  POTTER. 
Secretary 


ALEXANDER  LAMBERT.  Medical  Director 
ROBERT  D.  KOHN.   Consulting  Architect 
JOHN  H.  DERBY.  Fire  Prevention  Engineer 
JOHN  CALDER.  Safety  Expert 
CHRISTOPH  D.  ROEHR.   Commissary  Expert 
HENRY  WELLES  DURHAM.  Consulting  Engineer 


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Copyright  1916 

Gertrude  Beeks 

Director   Welfare  Department 

The  National  Civic  Fkderation 

New  York 


TABLE     OP     CONTENTS 


PAGE 

Introduction- 5 

Definition 16 

Some  French  Types 19 

Experience  in  England 25 

American   Systems 42 

Percentage   of   Profits 44 

Special  Distribution 72 

Stock  Ownership 136 

Exceptional  Plans 173 

Abandoned      "     186 

Proposed         "      210 

Opinions  of  American  Employers 215 

George  W.  Perkins 216 

Charles  M.  Schwab 224 

Wm.  F.  Donovan 225 

Herbert  M.  Lloyd 226 

American  Electric  Railway  Association 230 

W.  D.  Mahon— Comment 231 

Attitude  of  Trade  Unionists 233 

Samuel  Gompers  and  others 234 

Warren  S.  Stone 241 

Difficulties  of  Profit  Sharing 

Profit  Sharing;  Trade  Unionism;  Labor  Co-partnership. 

J.  W.  Sullivan 244 

Should   AVage    Earners    Invest   in    Corporation    Stock? 

Ralph  M.  Easley 255 

Legal  Status  of  Employer  and  Employee. 

Francis  X.  Butlecm^/^^M^,.^ 256 


INTRODUCTION. 

In  the  last  seventy-five  years  there  have  been  in  this 
country  and  in  Europe  various  attempts  on  the  part  of 
employers  of  labor  to  establish  schemes  whereby 
employees  would  receive  some  share  in  the  earnings  of 
the  business  in  addition  to  their  fixed  regular  wages. 

These  wage  additions  have  been  indiscriminately 
termed  "profit  sharing"  and  they  have  been  regarded 
by  many  employers  and  a  few  eminent  students  of  in- 
dustrial tendencies  as  forecasting  a  final  "solution  of 
the  labor  problem". 

Because  of  the  desire  of  many  employers  for  exact 
information  on  the  workings  of  these  plans,  and  public 
interest  in  the  claims  made  for  profit  sharing  as  a  gen- 
eral remedy  for  labor  difficulties,  The  National  Civic 
Federation  has  made  an  extensive  investigation  and 
analysis  of  more  than  200  plans  in  the  United  States,  em- 
bodying the  idea  in  one  form  or  another  of  extra  pay- 
ments to  labor.  Many  of  these  experiments  have  been 
abandoned  as  acknowledged  failures;  others  are  still  in 
existence  and  differ  widely  both  in  method  and  in  re- 
sults claimed  for  their  operation.  The  inquiry  by  The 
National  Civic  Federation  was  undertaken  with  a  view 
to  presenting  an  accurate  and  unbiased  statement  of  the 
facts,  and  the  results  are  published  for  whatever  light 
they  may  throw  upon  the  question  whether  profit  sharing 
is  a  success  or  a  failure. 

The  analysis  of  specific  plans  is  based  almost  wholly 
upon  data  furnished  by  the  companies  themselves,  and 
necessarily  so,  for  the  reason  that  practically  no  other 
sources  of  information  are  available.  It  is  not  possible 
to  learn  with  any  certainty  the  views  of  the  employees 
affected,  since  nearly  all  of  these  undertakings  are 
carried   on   by   employers   of   non-union  labor,  and  un- 


organized  workfTg  have  no  authorized  spokesmen.  Noth- 
ing more  satisfactory  could  be  obtained,  therefore,  from 
the  labor  standpoint,  than  scattered  individual 
opinions. 

The  views  of  a  large  number  of  representative  lead- 
ers of  organized  labor  were  asked  and  obtained,  and 
these  are  unanimous  in  opposition  to  the  general  theory 
and  practice  of  profit  sharing,  as  will  be  noted  from  the 
statements  quoted  in  the  body  of  the  report.  It  should 
be  remembered,  however,  that  these  representatives  are 
entitled  to  speak  with  authority  for  only  a  part  of 
the  wage-earning  population  of  the  country,  and  that  we 
have  no  means  of  knowing  whether  their  hostile  attitude 
is  shared  in  any  measure  or  at  all  by  the  mass  of  unor- 
ganized workers.  Only  a  very  small  proportion  of  these 
unorganized  workers  know  anything  about  profit  shar- 
ing from  actual  experience,  and  it  cannot  be  assumed 
arbitrarily,  therefore,  that  they  would  object  to  its  in- 
troduction or  that  they  would  have  any  interest  in  the 
reasons  urged  against  it  by  organized  workers. 

Neither  should  the  considerable  percentage  of  dubious 
results  shown  by  this  inquiry  lead  to  the  sweeping  conclu- 
sion that  all  profit  sharing  experiments  are  worthless. 
Many  of  them,  from  the  standpoint  of  special  local  con- 
ditions or  by  contrast  with  some  previous  order  of 
things,  no  doubt  show  a  net  improvement  in  the  welfare 
of  the  employees  affected  and  the  morale  of  the  plants. 
The  real  significance,  both  of  the  organized  labor  attitude 
and  of  the  proportion  of  failures  and  doubtful  results, 
lies  in  their  bearing  upon  the  possible  value  of  profit 
sharing  as  an  industrial  remedy  of  general  application. 

This  in  turn  involves  consideration  of  the  fear  of  or- 
ganized labor  that  the  employers'  real  interest  in  profit 
sharing  lies  in  its  alleged  usefulness  as  a  means  to  weaken 
and  disrupt  the  trade  unions,  and  that  with  this  once  ac- 
complished the  employing  interests  would  be  free  to  regu- 
late wages  and  hours  to  suit  themselves,  with  no  effective 


equality  of  bargaining  power  left  in  the  hands  of  the 
workers. 

Such,  at  any  rate,  is  the  labor  attitude  as  expressed 
by  trade  union  representatives.  It  is  not  within  the  scope 
of  the  present  inquiry  to  examine  the  merits  of  organized 
labor's  objections  to  profit  sharing,  or  to  determine 
whether  the  interests  of  labor  generally  would  be  safer 
under  profit  sharing  than  with  the  economic  power  of  or- 
ganization in  its  own  hands.  This  is  a  very  large  problem 
in  itself,  second  to  few  if  any  others  in  its  bearing  upon 
the  future  of  our  industrial  and  social  institutions.  Its 
gravity  should  be  borne  in  mind  in  any  consideration  of 
proposed  substitutes  for  the  means  which  so  important 
an  element  of  the  wage-earning  class  has  considered 
necessary  to  secure  its  rights  and  advance  its  welfare, 
ever  since  the  beginnings  of  the  modern  industrial  system. 

There  have  been  examined  and  considered,  in  the 
course  of  this  inquiry,  more  than  350  plans,  including  a 
dozen  or  fifteen  incorrectly  represented  as  profit  sharing 
enterprises  which  prove  to  have  no  feature  of  that  char- 
acter. Nearly  150  of  the  descriptions  could  not  be  utilized 
for  a  variety  of  reasons.  A  considerable  number  are 
strictly  bonuses  on  exceptional  product  or  sales  of  the 
individual  employee,  under  the  *' efficiency  system,"  and 
not  profit  sharing  by  the  standard  definition.  Many 
others  are  merely  occasional  gifts  of  cash,  clothing, 
Christmas  turkeys  and  the  like,  or  wage  bonuses  recently 
declared,  with  no  information  as  to  whether  they  will  be 
continued  as  permanent  profit  sharing  distributions. 
Some  of  the  companies  on  record  as  profit  sharing  con- 
cerns have  gone  out  of  business,  or  have  been  sold  to 
other  interests  and  the  profit  sharing  discontinued.  In 
very  many  cases  the  plans  reported  are  too  trivial  and 
unimportant  to  justify  treatment,  in  others  plans  have 
been  proposed  but  never  put  in  force,  and  still  other 
companies  reported  as  engaging  in  profit  sharing  prove 
upon  investigation  merely  to  be  considering  the  idea  with- 
out having  formulated  a  plan.    A  few  companies  decline 


8 

to  furnish  details,  certain  others  prefer  that  their  names 
be  not  mentioned,  and  a  surprisingly  large  number  submit 
data  too  meagre  for  an  adequate  description.  Some  of 
these  have  been  included  in  the  present  report,  never- 
theless, because  of  their  relative  importance,  and  in  the 
full  knowledge  that  the  analyses  may  fail  to  do  justice 
to  the  plans  described  by  reason  of  inability  to  obtain 
the  specific  information  requested  in  a  series  of  persistent 
communications. 

It  was  impossible  to  incorporate  in  a  single  volume 
full  details  of  descriptions  of  the  plans  of  American  em- 
ployers, but  arrangements  may  be  made  with  the  Wel- 
fare Department  of  The  National  Civic  Federation  for 
the  loan  of  those  in  its  possession,  as  well  as  certain 
forms  of  certificates,  agreements,  etc.,  employed  in  con- 
nection with  their  operation. 

For  exhaustive  reports  upon  profit  sharing  and  labor 
copartnership  in  the  "United  Kingdom"  and  upon  the 
same  subject  "Abroad"  those  published  by  the  British 
Board  of  Trade  in  1912  and  1914,  respectively,  are  the 
most  valuable  documents  to  be  consulted.  Both  contain 
extensive  bibliographies.  The  great  authorities  on  co- 
partnership are  Henry  Vivian  and  F.  Maddison. 

It  is  not  to  be  assumed  from  the  fact  that  some  200 
experiments  are  analyzed  in  this  report,  that  we  have  in 
this  country  or  at  any  time  have  had  anything  like  that 
number  of  true  profit  sharing  enterprises  in  operation. 
Comparatively  few  of  the  undertakings  commonly  spoken 
of  as  types  of  profit  sharing  fall  within  the  definition 
adopted  by  the  International  Congress  on  Profit  Sharing 
in  Paris  in  1889  and  amplified  in  1896,  which  is  practical- 
ly identical  with  that  given  in  the  Encyclopedia  Britan- 
nica.  These  definitions  are  quoted  at  the  outset  of  the 
report  herewith  presented,  and  it  will  be  seen  by  com- 
parison with  their  terms  that  a  very  large  number  of  our 
so-called  profit  sharing  plans  are  in  reality  merely  in- 
definite and  irregular  gratuities  volunteered  by  employ- 
ers at  their  own  discretion,  sometimes  merely  as  a  per- 


9 

sonal  expression  of  good-will,  sometimes  in  the  hope  of 
creating  a  friendly  interest  among  the  employees  and 
thereby  attracting  and  holding  a  desirable  class  of  labor, 
and  sometimes  to  hold  in  check  a  disposition  to  demand 
higher  wages. 

Because  of  the  great  variety  of  these  experiments,  and 
many  overlapping  features,  exact  classification  is  diflB- 
cult.  For  general  purposes,  however,  they  may  be  group- 
ed under  one  or  the  other  of  three  main  heads,  as  follows : 

1.  Percentage  of  profit  plan,  under  which  the  em- 
ployer agrees  to  pay  to  his  employees  a  certain  per- 
centage, fixed  in  advance,  of  the  profits  of  the  busi- 
ness. 

2.  Special  distributions  or  gratuities,  under  which 
the  employer  voluntarily  makes  contributions  to  the 
employees'  income  in  a  great  variety  of  forms,  rang- 
ing from  discounts  on  supplies  purchased  to  cash 
bonuses  paid  usually  at  the  end  of  the  year. 

3.  Stock  ownership  plan,  under  which  the  em- 
ployee purchases  stock  in  the  employing  corporation, 
pays  for  the  same  in  installments,  and  in  addition 
to  the  regular  dividends  receives  a  bonus  of  so  many 
dollars  per  share  in  consideration  of  his  not  dispos- 
ing of  the  stock  or  not  leaving  the  company's  employ 
for  certain  fixed  periods  of  time. 

A  typical  example  of  the  percentage  of  profit  plan  is 
that  of  the  Eastman  Kodak  Company,  Kochester,  New 
York. 

The  Crane  Company,  of  Chicago,  presents  a  good 
illustration  of  special  distribution  schemes. 

A  notable  test  of  the  stock  subscription  idea  is,  of 
course,  that  being  made  by  the  United  States  Steel  Cor- 
poration. 

Attention  is  given  also  to  a  number  of  exceptional 
plans  which  cannot  well  be  placed  in  any  of  the  three 
general  groups.  Of  this  nature  are  the  unique  profit-and- 
loss  sharing  scheme  of  the  A.  W.  Burritt  and  Company, 
the  limited  stock  control  experiment  of  the  Dennison  Man- 


10 

ufacturing  Company,  and  the  famous  five-dollar-a-day 
minimum  wage  plan  of  the  Ford  Motor  Company. 

The  report  reaches  the  interesting  conclusion  that  the 
Ford  plan,  although  described  by  the  company  and  popu- 
larly understood  as  profit  sharing,  does  not  fall  within 
the  standard  definition  and  is  in  reality  a  unique  high 
wage  system  made  possible  by  extraordinary  conditions. 
The  extra  payments  to  labor  are  not  a  fixed  percentage 
of  profits,  are  not  made  dependent  upon  and  do  not  vary 
with  the  size  of  the  profits,  but  are  paid  simply  as  a  part 
of  the  regular  daily  wages  and  amount  to  an  outright  wage 
increase,  conditional  only  upon  certain  tests  of  character 
and  fitness,  having  no  necessary  relation  to  the  theory 
of  profit  sharing  as  such. 

A  later  development,  in  the  sharing  of  excessive  profits 
through  increasing  wages,  is  the  20%  addition  to  the  pay 
roll  made  by  many  war  munition  manufacturers.  This 
distribution  is  announced  as  a  temporary  arrangement 
to  be  determined  by  the  war  period  and  demand  for 
ammunition. 

A  very  large  number  of  concerns  have  established 
pension  and  relief  funds  for  their  employees,  to  which 
funds  the  concerns  contribute  annually  from  their  profits. 
While  many  employers  regard  their  contributions  to  these 
funds  as  profit  sharing,  they  are  not  described  herein. 

_  A  large  number  of  the  companies  whose  plans  are 
analyzed  report  that  they  consider  profit  sharing  a  suc- 
cess. Others  presumably  hold  the  same  view  from  the 
fact  that  they  continue  the  experiment  from  year  to  year. 
Many  reasons  are  given  by  these  employers  for  their  faith 
in  the  idea.  Among  these  are  that  it  promotes  more  con- 
tinuous service,  reduces  cost  of  production,  secures  more 
regular  attendance  at  work,  builds  up  confidence  and 
creates  a  spirit  of  co-operation,  gets  rid  of  rolling  stones 
and  encourages  home  building,  enables  the  company  to 
keep  its  employees  during  rush  seasons,  keeps  down  ex- 
penses, induces  salesmen  as  well  as  the  others  interested 


11 

to  work  harder,  promotes  efficiency,  interest  and  loyalty; 
and  increases  the  profits  of  the  business. 

Many  illustrations  of  these  results  claimed  by  em- 
ployers will  be  found  in  the  analyses  of  the  various  plans. 
Again,  it  must  be  borne  in  mind  that  the  statements  of 
the  employees'  attitude  do  not  come  from  the  workers 
themselves  but  from  their  employers.  This  does  not 
necessarily  mean  that  the  workers  are  less  enthusiastic 
on  the  subject  than  the  employers'  reports  would  indicate, 
but  neither  can  the  evidence  on  that  point  be  termed  con- 
clusive. 

While  most  of  the  specific  objections  to  profit  sharing, 
as  already  stated,  come  from  organized  labor,  employers 
who  have  had  experience  on  the  subject  are  by  no  means 
a  unit  as  to  its  practical  value.  Some  employers  express 
disappointment  that  the  efforts  of  their  companies  were 
not  appreciated  by  the  men,  that  they  seemed  to  prefer 
their  total  earnings  in  fixed  wages  with  no  variable  ele- 
ment, that  they  were  suspicious  of  the  employers'  mo- 
tives, that  they  insisted  upon  joining  unions  and  pre- 
senting demands  in  spite  of  the  companies'  efforts  to 
give  them  a  share  in  the  extra  gains  of  the  business, 
that  when  stock  was  sold  to  employees  upon  favor- 
able terms  they  would  dispose  of  it  at  a  profit  when 
its  value  rose,  and  so  get  the  habit  of  watching  the 
stock  market,  that  when  the  profit  distribution  was 
large  the  employees  learned  to  expect  a  similar  "bon- 
anza" every  year  and  were  disgruntled  if  they  did  not 
get  it,  to  say  nothing  of  their  discontent  if  conditions 
forbade  any  extra  payment  at  all ;  and  that  all  schemes  of 
this  sort  are  necessarily  complicated  and  hard  to  under- 
stand, so  that  the  workers,  especially  of  the  less  intelli- 
gent grades,  are  not  easily  convinced  that  the  system 
really  benefits  them  and  is  not  merely  a  device  to  withhold 
a  part  of  what  they  might  otherwise  demand  and  get. 

That  difficulty  of  comprehension  is  real  and  not  im- 
aginary must  be  acknowledged  by  investigators  of  the 
great  number  of  schemes  attempted,  hardly  any  two  being 


12 

precisely  alike,  and  many  of  them  apparently  based  upon 
no  accepted  economic  theory  but  embodying  ideas  pe- 
culiar to  the  individual  employer.  This  is  especially 
true  of  the  many  plans  which  base  an  equal  percentage  of 
profit  division  upon  the  total  capital,  for  the  employer, 
and  the  total  wage  roll,  for  the  employee,  although  the 
two  are  in  their  economic  nature  wholly  unlike,  the  one 
being  a  fixed  investment  and  the  other  a  form  of 
earnings. 

One  employer  of  national  prominence,  who  has  made 
a  number  of  interesting  experiments  in  the  effort  to  bet- 
ter the  conditions  of  labor,  bases  his  disbelief  in  profit 
sharing  upon  the  trouble  and  discontent  that  are  likely 
to  result  either  from  the  inability  of  the  employing  com- 
pany at  times  to  pay  the  expected  dividends,  or  from 
the  employer's  desire  to  husband  his  resources,  as  for 
example  to  build  a  new  factory  giving  work  to  a  larger 
number  of  men,  while  the  profit  sharers,  to  whom  he 
believes  the  company's  books  should  be  open,  want  him 
to  pay  out  the  funds  immediately  as  dividends  to  them- 
selves. 

His  views  are  more  or  less  in  accord  with  those  of 
the  labor  leaders,  as  he  prefers  to  ''pay  high  wages,  to 
..which  should  be  added  welfare  work,  first  providing  for 
good  health  and  then,  among  other  things,  rational  means 
of  recreation."  Savings  banks  and  building  and  loan 
associations  and  forms  of  insurance  afford  adequate 
opportunity  for  the  wage  earners  to  make  their  own 
investments,  in  his  opinion,  if  the  employer  pays  all  the 
dividends  he  can  afford  in  the  form  of  high  wages  every 
week. 

Among  the  points  raised  against  profit  sharing  by 
trade  unionists  the  chief  is,  of  course,  that  the  interests 
of  labor  as  a  whole  would  be  imperilled  by  any  weaken- 
ing or  destruction  of  strong  organization  to  protect  wage 
standards  which,  under  profit  sharing,  would  pass  wholly 
under  the  control  of  the  employers. 


13 

Another  objection  by  organized  labor,  whicli  it  must 
be  acknowledged  is  borne  out  by  the  statistics  of  many  of 
these  experiments,  is  that  profit  sharing  chiefly  affects 
only  the  superintendents,  foremen  and  higher  grades 
of  employees  and  does  not  reach  the  rank  and  file. 
Either,  it  is  claimed,  the  profit  payments  are  too  small 
to  be  of  any  moment  to  the  low  paid  workers,  or,  where  it 
is  a  stock  subscription  plan,  the  mass  of  the  workers  do 
not  earn  enough  to  buy  any  stock,  even  on  installments. 

Union  representatives  also  point  out  that  labor  itself 
is  making  no  demand  for  profit  sharing,  either  in  the 
organized  or  unorganized  fields,  and  that  the  things  of 
real  and  vital  interest  to  labor  are  not  those  which  em- 
ployers propose  but  which  emanate  from  the  working-men 
themselves. 

Another  frequent  criticism  is  that  market  wages  are 
not  paid  where  profit  sharing  is  applied,  so  that  wages 
and  profits  together  do  not  exceed  and  often  do  not  equal 
the  prevailing  union  scale.  Analysis  of  the  report 
shows  that  this  charge  is  not  borne  out  in  some  cases, 
and  that  there  are,  in  fact,  a  few  profit  sharing  experi- 
ments by  concerns  employing  union  labor.  It  is  prob- 
able, however,  that  in  a  majority  of  instances  union 
rates  of  wages  are  not  paid  by  the  companies  employing 
non-union  labor  and  carrying  on  profit  sharing  experi- 
ments. 

It  has  been  urged  by  labor  representatives,  further- 
more, that  while  profit  sharing  is  often  described  as  a 
means  of  bringing  them  into  closer  relation  with  the 
ownership  and  management  of  the  property,  it  gives 
no  real  voice  in  the  control,  not  even  the  right  to  inspect 
the  books  to  determine  in  what  way  the  company  figures 
the  profits  of  which  the  employees  are  supposed  to 
receive  a  certain  percentage.  A  number  of  companies, 
whose  plans  are  analyzed  in  this  report,  do  grant  this 
specific  privilege  to  committees  of  employees  but  the 
majority  probably  do  not.  A  further  question  is  here 
involved,  of  course,  to  what  extent  employees  have  con- 


u 

fidence  in  the  records  and  accounts  submitted  to  them. 
Probably  in  very  few  cases  would  suspicion  be  war- 
ranted on  this  score,  but  the  element  of  suspicion  itself, 
to  whatever  extent  it  exists,  must  be  reckoned  with  as  one 
of  the  factors  bearing  on  the  practical  value  or  otherwise 
of  this  book  examination  privilege.  Much  more  serious 
is  the  fact  of  the  difficulty  committees  of  workingmen 
are  likely  to  find  in  understanding  the  book  accounts  of 
a  large  and  complicated  business  enterprise.  Frequently, 
the  directors  of  such  concerns  require  the  services  of 
highly  paid  expert  accountants  in  order  to  reduce  the 
year's  operations  to  a  point  where  they  themselves  are 
able  to  comprehend  the  net  results. 
^  Some  of  the  spokesmen  for  labor  further  object  to  the 
whole  theory  of  profit  sharing  on  the  ground  that  if  the 
profits  are  paid  as  something  actually  earned,  they  are  a 
right  and  should  be  as  definitely  a  legal  claim  of  labor  as 
are  wages,  rather  than  a  payment  optional  with  the  em- 
ployer; while  on  the  other  hand,  if  they  are  not  a  right, 
they  are  merely  gifts,  creating  an  un-American  sense  of 
obligation  and  dependence  among  the  workers  and  often 
preventing  them  from  demanding  what  they  conceive  to 
be  their  rightful  earnings. 

The  present  report  makes  no  attempt  to  decide  be- 
tween these  conflicting  claims  or  to  weigh  the  relative 
importance  of  the  advantages  and  disadvantages  of  profit 
sharing.  It  endeavors  to  show  impartially  all  important 
details  of  the  plans  as  described  by  the  companies  main- 
taining them,  the  claims  made  for  them  and  the  objections 
urged  against  them.  Many  ingenious  features  have  been 
worked  out  in  some  of  these  plans,  and  the  analyses  are 
full  of  interesting  sidelights  on  their  practical  workings 
and  larger  significance.  An  attempt  to  summarize  these 
could  only  do  injustice  to  many  omitted  items  equally 
worthy  of  attention;  but  whoever  is  in  search  of  light 
upon  the  subject,  either  in  its  practical  bearings  or  from 
the  social  viewpoint,  will  find  the  entire  report  of  absorb- 


15 

ing  interest.  It  is  the  last  word  on  American  experience 
with  profit  sharing  and  the  attitude  towards  it  of  the 
various  elements  most  directly  concerned. 

Hayes  Robrtns.* 

New  York,  April  1,  1916. 


♦Graduate,  School  of  Social  Economics  (New  York),  1896,  and  Dean 
of  same  1889-1903.  Joint  author  "Outlines  of  Social  Economics"  and 
"Outlines  of  Political  Science."  Secretary  Civic  Federation  of  New 
England  (Boston),  1905-1909.  Editorial  writer,  and  contributor  to 
monthly  reviews. 


16 


DEFINITION  OF  PROFIT  SHARING. 

As  long  ago  as  1889,  an  International  Congress  on 
Profit  Sharing  was  held  at  Paris,  which  was  largely  at- 
tended. At  that  meeting  a  resolution  was  passed,  de- 
fining profit  sharing  in  the  following  terms : 


<<  I 


The  International  Congress  is  of  the  opinion 
that  the  agreement,  freely  entered  into,  by  which  the 
employee  receives  a  share,  fixed  in  advance,  of  the 
profits,  is  in  harmony  with  equity  and  with  the  essen- 
tial principles  underlying  all  legislation. 


>> 


This  definition  was  adopted  by  the  International  Co- 
operative Congress  held  in  Delft  in  1897,  reiterated  by 
the  International  Congress  on  Profit  Sharing  held  in 
Paris  in  1900,  and  is  today  the  generally  accepted  def- 
inition of  true  profit  sharing. 

The  International  Co-operative  Congress  held  in  Paris 
in  1896  appointed  a  special  committee  to  report  on  the 
exact  meaning  of  the  term  Profit  Shaeing,  and  the  re- 
port of  the  committee  submitted  to  the  Delft  Congress 
in  1897,  embodying  the  above  definition,  also  stated : 

''With  respect  to  the  'agreement'  mentioned  in 
the  definition,  the  committee  considers  that  while 
an  agreement  binding  in  law  is  the  normal  form,  it 
do  not  exclude  cases  in  which  the  agreement  has  only 
a  moral  obligation,  provided  that  this  agreement  is, 
in  fact,  honorably  carried  out. 

"By  a  'share'  in  profits  is  meant  a  sum  paid  to 
an  employee,  in  addition  to  his  wages,  out  of  the 
profits,  the  amount  of  which  is  dependent  on  the 
amount  of  these  profits.  If  an  employer  undertakes, 
for  example,  to  contribute  to  a  Pension  Fund  £1  for 
every  £2  contributed  by  his  workmen,  this  is  not  a 
case  of  Profit-sharing,  unless  the  undertaking  is  to 
pay  out  of  profits  only,  because  the  sum  payable 


17 

under   the   agreement   does   not   depend   upon   the 
amount  of  the  year's  profits. 

"With  respect  to  the  'profits'  a  share  in  which  is, 
under  a  profit-sharing  scheme,  allotted  to  the  em- 
ployees, these  profits  are,  in  the  opinion  of  the  com- 
mittee, to  be  understood  as  the  actual  net  balance  of 
gain  realized  by  the  financial  operations  of  the  under- 
taking in  relation  to  which  the  scheme  exists.  It 
is,  therefore,  necessary  to  point  out  that  the  pay- 
ment of  bonus  on  output,  premiums  proportionate  to 
savings  effected  in  production,  commission  on  sales, 
and  other  systems  under  which  the  amount  of  the 
bonus  depends  upon  the  quality  or  amount  of  the 
output  or  volume  of  business,  irrespective  of  the  rate 
of  profit  earned,  does  not  constitute  Profit-sharing. ' ' 

The  Encyclopedia  Britannica  (11th  Edition)   defines 


it: 


"Profit  Sharing  {i.  e.,  between  employer  and  em- 
ployee) a  method  of  remunerating  labor  under  which 
the  employees  receive  in  addition  to  ordinary  wages 
a  share  of  the  profit  which  the  business  realizes.  The 
term  is  not  infrequently  used  loosely  to  include  many 
forms  of  addition  to  ordinary  wages,  such  as  bonus 
on  output  or  quality,  gain  sharing  and  product  bear- 
ing. Yet  strictly  where  an  employee  or  group  works 
for  a  share  of  the  products,  or  is  paid  so  much  in 
addition  to  ordinary  wages  in  proportion  as  the 
product  exceeds  a  certain  standard,  in  neither  of 
these  cases  have  we  profit  sharing,  for  the  net  result 
of  the  business  may  be  a  large  profit  or  a  small  one 
or  a  loss  and  the  employee  is  unaffected.  In  the 
same  way  if  a  workman  is  employed  on  the  basis  that 
if  in  doing  a  particular  job  he  saves  something  out 
of  a  stipulated  time  or  labor,  or  a  stipulated  amount 
of  material,  he  shall  receive  in  addition  to  ordinary 
wages  a  proportion  of  the  value  so  saved,  that  is 
technically  gain  sharing,  not  profit  sharing.  Even 
where  the  bonus  depends  strictly  on  profit,  it  is  not 
reckoned  as  profit  sharing  if  it  is  confined  to  the 
leading  employees. 

"An  agreement  is  the  essence  of  the  matter.  It 
is  not  profit  sharing  where  an  employer  takes  some- 


18 

thing  from  his  profits  at  his  own  will  and  pleasure 
and  gives  it  to  his  employees." 

While  the  principle  of  profit  sharing  in  some  form 
or  other  is  undonbtedly  of  ancient  origin,  it  was  not  until 
the  year  1842  at  Paris,  France,  that  profit  sharing  in  its 
strict  sense  was  definitely  applied  to  a  commercial  enter- 
prise, in  a  house-painting  establishment  known  as  the 
Maison  Leclaire.  A  sketch  of  this  pioneer  venture  is 
given  in  another  chapter. 


^ 


19 


SOME  FRENCH  TYPES. 

The  Maison  Leclaire. 

Edme-Jean  Leclaire,  who  has  been  called  the  Father 
of  Profit  Sharing,  was  born  in  1801,  the  son  of  a  poor 
village  shoemaker.  At  the  age  of  seventeen  he  went  to 
Paris,  penniless  and  alone,  where  he  became  a  painter's 
apprentice  and  then  a  decorator,  and  at  the  age  of  twen- 
ty-six he  set  up  a  business  for  himself  as  a  housepainter. 
In  1838  he  established  a  Mutual  Aid  Society  for  his  em- 
ployees, and  four  years  later  his  business  had  grown 
to  such  proportions  that  he  had  in  his  employ  300  men 
on  day  wages.  It  was  his  idea  that  by  generating  greater 
zeal  and  enthusiasm  among  his  workmen  and  preventing 
waste,  they  could,  without  any  harder  work,  save  him 
75,000  francs  a  year.  He  made  it  a  matter  of  financial 
interest  to  his  men  to  do  so  by  agreeing  to  pay  them  a 
certain  fixed  percentage  of  the  profits.  His  plan,  which  is 
still  in  operation  in  the  business  which  he  founded,  is  as 
follows : 

After  paying  5%  interest  on  the  capital  and  small 
sums  as  wages  to  the  two  managing  partners,  the  re- 
maining profit  is  divided  into  four  parts,  one  of  which 
goes  to  the  managing  partners,  one  to  the  Mutual  Aid 
Society  of  the  firm,  and  two  to  the  employees  as  dividends 
on  their  wages  exclusive  of  piece  work  and  overtime,  on 
which  no  dividend  is  paid.  The  Mutual  Aid  Society  is  a 
registered  body  and  is  a  limited  partner  in  the  firm,  the 
liability  of  the  two  managing  partners  being  unlimited 
and  the  control  resting  entirely  in  their  hands.  The 
benefits  of  the  Mutual  Aid  Society  and  all  the  profit  shar- 
ing generally  are  enjoyed  in  the  main  by  all  the  employees 
of  the  business  but  certain  advantages  are  confined  to  a 
limited  number  of  prominent  employees. 


20 

Leclaire,  who  died  in  1872  leaving  a  fortune  estimated 
at  over  1,200,000  francs,  attributed  his  success  to  his 
profit  sharing  scheme,  resulting  in  the  co-operation  of 
his  workmen,  without  which  he  maintained  it  would  have 
been  impossible  for  him  to  have  established  so  large  a 
business  or  accumulated  his  fortune. 

The  house  of  Leclaire  is  now  known  as  Brugniot,  Cros, 
et  Cie.  It  employs  more  than  twelve  hundred  persons, 
including  a  salaried  staff  of  sixty.  About  140  of  the 
employees  are  set  apart,  by  reason  of  their  experience 
and  character,  in  a  special  classification  called  the 
''nucleus,"  leaving  about  1,000  in  the  unpref erred  class. 
The  active  partners  chosen  from  among  the  salaried  staff 
are  required  to  put  a  certain  amount  of  capital  into  the 
business,  but  this  capital  represents  accumulations  of 
their  shares  in  the  annual  distribution  of  profits.  New 
members  of  the  "nucleus"  are  appointed  at  a  general 
meeting  of  that  class.  The  profits  are  divided  among  the 
employees  in  proportion  to  their  wages  and  salaries. 
The  annual  profits  run  as  Mgh  as  $100,000.  Of  this  sum, 
the  wage  and  salary  workers  receive  50  per  cent,  $50,000 ; 
the  mutual  provident  and  benefit  societies  35,  $35,000; 
and  the  active  partners  15,  $15,000.  In  a  good  year,  the 
bonus  to  the  workers  in  general  forms  an  addition  of 
20%  to  their  earnings.  A  life  pension  of  $300  is  granted 
to  a  member  at  the  age  of  fifty  who  has  completed  twenty 
years  of  service.  Widows  of  members  (and  orphans  until 
their  majority)  draw  a  half  pension.  Non-member  work- 
men, disabled  while  in  the  employ  of  the  company,  are 
entitled  to  a  pension  of  $300.  Other  forms  of  benefits, 
including  insurance,  are  paid.  The  funds  of  the  society 
had  five  years  ago  reached  $750,000.  The  educational 
features  of  the  company  are  noteworthy.  Much  of  the 
finer  work  in  house  painting  and  decorating,  not  only  in 
Paris  but  throughout  France  and  in  other  countries,  is 
performed  by  employees  of  the  company. 

The  story  of  the  moral  effect  of  Leclaire 's  theories 
put  in  practice  is  even  more  interesting  than  the  state- 


21 

ment  of  the  financial  gains  of  the  workmen.  Leclaire 
himself  stated  that  in  the  early  years  of  his  experience 
as  an  employer  it  was  commonly  necessary  for  him,  when 
having  two  men  perform  a  job,  to  send  a  third  man  to 
supervise  their  work  and  keep  them  in  order.  A  few 
years  after  establishing  his  profit  sharing,  this  was  un- 
necessary. At  his  first  annual  payment  the  men,  on  re- 
ceiving their  bonuses,  were  suspicious  that  some  form 
of  trickery  was  to  be  attempted  upon  them.  It  was  not 
until  after  several  yearly  payments  had  been  made  that 
anything  like  general  confidence  was  established.  No 
attempt  at  a  full  description  of  this  famous  case  of  profit 
sharing  can  be  here  made.  It  is  commonly  spoken  of  as 
a  model  which  in  many  respects  may  be  fruitfully  studied 
by  employers  entertaining  intentions  of  beginning  profit 
sharing. 

The  "Familistere  de  Guise"  is  the  name  of  a  remark- 
able development  of  labor  co-partnership,  co-operation, 
and  community  living  in  a  small  town  in  the  northeast 
of  France.  It  sprang  from  the  philanthropic  aspirations 
of  J.  B.  Andre  Godin,  who  founded  a  manufactory  of 
heating  apparatus,  hardware  and  similar  products  in 
1840.  In  1876  he  introduced  profit  sharing  and  in  1880 
established  a  joint  stock  company  with  various  forms  of 
co-operation.  New  co-operative  or  even  "communistic" 
features  were  from  time  to  time  added.  These  included 
the  care  of  young  children  in  groups  by  competent 
nurses;  the  various  grades  of  schools,  with  vocational 
training;  a  community  theatre;  co-operative  supply 
stores  on  the  Rochdale  system;  and  preparation  for  the 
higher  education.  The  homes  of  a  large  proportion  of 
the  workmen  and  their  families  were  in  a  "palace"  de- 
signed with  due  regard  to  comfort,  cleanliness,  and  gen- 
eral utility.  Of  recent  years,  the  number  of  employees 
has  been  about  2,300.  Of  these  in  1910,  more  than  1,400 
had  served  more  than  ten  years  and  675  more  than 
twenty  years.     The  great  works  of  the  company  lie  at 


22 

one  side  of  a  little  stream  (the  Cise)  not  far  from  its 
source,  and  the  buildings  pertaining  to  home  life  on  the 
other  side,  the  whole  surrounded  by  farm  lands. 

When  M.  Godin  died  in  1888  he  bequeathed  to  the  com- 
pany $600,000.  The  capital  has  recently  been  about 
$1,200,000,  the  annual  business  reaching  $1,600,000,  and 
the  total  assets  more  than  $2,300,000.  The  division  of 
the  profits  is  according  to  a  complicated  system  worked 
up  in  the  course  of  years  through  long  continued  discus- 
sion. Sufficient  here  to  say  that  men  regularly  employed 
by  the  company,  while  never  expecting  to  become  rich, 
can  look  forward  to  a  life  with  no  exhausting  overwork, 
no  deprivation  of  necessaries  and  no  fear  of  pauperism. 
Pension  grants  to  the  sick  and  needy,  the  support  of  wid- 
ows and  orphans,  and  other  welfare  schemes  serve  to 
render  the  men  and  their  families  contented.  A  library 
and  musical  and  athletic  societies  were  long  ago  estab- 
lished. 

It  is  sad  to  record  that  the  entire  works,  the  village 
and  structures  of  all  kinds  connected  with  the  institution 
are  reported  by  the  newspapers  to  have  been  destroyed 
in  the  great  war. 

Laeoche-Joubert,  Laceoix  et  Cie. 

In  1843,  a  year  after  Leclaire  adopted  his  plan,  the 
paper  manufacturing  concern  of  Laroche-Joubert,  La- 
croix  et  Cie.,  at  Angouleme,  France,  began  sharing 
profits  with  their  work  people  of  whom  there  are  at  pres- 
ent eleven  or  twelve  hundred.  The  profits  are  appor- 
tioned 25  per  cent  to  capital,  25  per  cent  to  the  managing 
directors  and  the  board  of  management,  and  50  per  cent 
to  the  salary  and  wage-earners. 

The  Paeis  and  Oeleans  Railway  Company. 

In  1844  the  Paris  and  Orleans  Railway  Company 
adopted  a  profit  sharing  plan  with  its  employees.  Event- 
ually, instead  of  paying  its  employees  cash  bonuses,  the 


23 

dividends  declared  were  paid  in  favor  of  their  accounts 
in  the  State  Pension  Office. 

The  Bon  Maeche, 

In  1876,  Jacques  Aristide  Boucicaut,  the  founder  of 
the  Bon  Marche,  and  the  proprietor  until  his  death  in 
1877,  adopted  a  plan  of  profit  sharing  which  was  ex- 
tended by  his  widow,  who  succeeded  in  the  management 
of  the  business.  The  present  co-partnership  scheme 
dates  from  1880,  when  the  principal  members  of  the  staff 
were  taken  into  partnership.  The  present  capital  of  this 
great  department  store  is  twenty  million  francs,  and  the 
yearly  sales  exceed  forty  million  dollars.  The  somewhat 
complicated  plan  includes  sales  of  stock,  apportionment 
of  a  part  of  the  profits,  payments  to  a  pension  fund,  and 
the  benefits  of  various  welfare  institutions  in  connection 
with  the  establishment. 

The  General  Assurance  Company  established  profit 
sharing  in  1850.  It  employs  about  four  hundred  fifty 
clerks  and  messengers.  Since  1850,  the  company  has  paid 
into  the  employees'  provident  fund  sums  aggregating 
more  than  four  million  dollars. 

The  Union  Fire  Insurance  Company  began  sharing 
profits  in  1838.  In  1910  the  managers  received  bonuses 
equivalent  to  70.52  per  cent  of  their  salaries,  the  sub- 
managers  52.89,  and  the  inspectors  35.26 ;  while  the  clerks, 
messengers,  etc.  received  sums  equivalent  to  24.41,  with- 
out counting  special  gratuities  granted  to  "the  most 
deserving."  The  company  has  275  employees  of  the 
head  office,  30  divisional  inspectors  and  7,500  agents  and 
sub-agents  in  France  and  abroad. 

The  Chaix  Printing  Office  of  Paris  established  profit 
sharing  in  1872.  It  has  a  force  of  1,200  persons.  At 
present,  it  pays  the  whole  of  the  profits  shared  into  the 
old  age  pension  fund.  The  average  proportion  of  pen- 
sions to  wages  is  about  5  per  cent. 

The  National  Fire  Insurance  Company  began  a  form 
of  profit  sharing  in  1820,  but  it  was  given  only  to  a  few 


24 

participants.  It  now  allots  a  cash  bonus  of  5  per  cent 
on  the  total  sums  paid  as  dividend  and  interest.  It  has 
also  a  special  bonus  fund  for  pension  purposes.  It  also 
makes  grants  to  retired  employees  and  to  the  widows  and 
children  of  deceased  employees. 

The  Chatelet  Theatre  set  up  a  profit  sharing  scheme 
in  1911.  It  includes,  after  six  months'  continuous  service 
in  the  theatre,  members  of  the  orchestra,  officials  of  vari- 
ous kinds,  scene  shifters,  electricians,  call  boys,  porters, 
night  watchmen,  etc.  The  scheme  will  ''automatically 
come  to  an  end  if  the  operation  of  the  theatre  is  inter- 
rupted at  any  time  by  reason  of  a  general  strike."  Ten 
per  cent  of  the  profits  is  appropriated  to  a  friendly 
society  numbering  800  members,  employees  of  the  theatre. 

The  Godin  Steel  Works. 

In  1877,  Jean  Baptiste  Andre  Godin,  the  proprietor 
of  a  foundry  in  Guise,  France,  adopted  a  plan  of  profit 
sharing. 


25 


EXPERIENCE  IN  ENGLAND. 

The  success  of  Leclaire's  plan  in  France  attracted 
the  attention  of  a  number  of  English  economists,  among 
them  J  ohn  Stuart  Mill  and  John  Bright.  Beginning  with 
the  year  1865  a  number  of  profit  sharing  schemes  were 
attempted  in  England,  the  most  important  of  the  earlier 
schemes  immediately  follows. 

Heney  Briggs  Son  &  Company. 

In  1865,  this  firm,  as  the  owners  of  the  Whitwood 
Collieries  in  Yorkshire,  adopted  a  plan  of  profit  sharing 
for  the  avowed  purpose  of  detaching  their  workmen 
from  the  trade  union.  The  plan  was  apparently  success- 
ful for  about  eight  years,  during  which  time  about 
£40,000  was  divided  among  the  workmen  as  a  bonus  on- 
their  wages.  In  1873  the  men  went  on  a  strike  against 
a  reduction  in  wages  and  that  instant  marked  the  end  of 
profit  sharing  on  the  part  of  this  firm. 

In  England  there  are  over  twelve  million  persons 
engaged  in  gainful  pursuits  where  profit  sharing  is  pos- 
sible. 

The  "Report  on  Profit  Sharing  and  Labor  Co-part- 
nership in  the  United  Kingdom,"  published  by  the  Brit- 
ish Board  of  Trade  in  1912,  gives  the  history  of  every 
attempt  at  profit  sharing  in  England  from  1829  to  1913. 
The  net  result  is  that  in  all  that  time  there  were  299 
schemes  inaugurated.  Of  these  163  had  ceased  to  exist 
at  the  time  the  report  was  published.  Of  the  133  remain- 
ing, there  were  only  106,189  employees  involved,  and  the 
larger  number  of  those  were  employees  in  public  utili- 
ties. 

Of  those  engaged  in  the  operation  of  public  utilities, 
28,246  were  employed  by  gas  companies. 


26 

The  following  extract  from  the  report  describes  in 
detail  the  plan  of  an  important  gas  company : 

South  Metropolitan  Gas  Company. 

"At  the  beginning  of  November,  1889,  the  South 
Metropolitan  Gas  Company,  which  had  already  been 
giving  its  officers  and  foremen  an  annual  bonus  de- 
pendent upon  its  profits  since  1886,  adopted  a  scheme 
of  general  participation.  In  March,  1889,  'The  Na- 
tional Union  of  Gas  Workers  and  General  Labour- 
'ers  of  Great  Britain  and  Ireland'  was  formed,  and 
shortly  afterwards  succeeded  in  obtaining  very  con- 
siderable concessions  in  favour  of  men  employed  in 
gasworks.  In  August-September,  1889,  the  London 
dock  strike  took  place ;  and  a  general  movement  was 
started  for  securing  better  terms  of  employment  for 
the  working-classes,  and  especially  for  labourers  do- 
ing heavy  work  demanding  a  minimum  of  technical 
skill,  such  as  the  work  required  in  gas  making.  In 
the  course  of  the  autumn  the  Gas  Workers'  Union 
made  certain  demands  upon  the  South  Metropolitan 
Gas  Company;  these  were  not  resisted,  but  the  com- 
pany's officials  became  convinced  that  further  con- 
cessions which  the  company  would  feel  unable  to 
grant  would  probably  be  put  forward  by  the  Union, 
and  that  'a  strike  was  likely  to  take  place  at  any  mo- 
*ment  without  any  warning.'  In  order  to  avert  this 
contingency,  Mr.  (afterwards  Sir)  George  Livesey, 
the  chairman  of  the  company,  induced  the  directors 
to  assent  to  the  adoption  of  a  special  system  of 
profit-sharing.  The  company  employs  a  large  num- 
ber of  workmen,  some  all  the  year  round  regularly, 
the  others  in  winter  only.  The  offer  made  (on  No- 
vember 6,  1889)  to  all  the  regular  staff  in  the  ser- 
vice of  the  company  was  as  follows.  The  sharehold- 
ers (as  the  law  then  stood)  were  allowed  to  receive 
a  dividend  of  10  per  cent  when  the  price  of  gas  was 
not  above  35.  6d.  per  1,000  feet,  and  an  additional 
dividend  of  i/l  per  cent  for  each  reduction  of  one 
penny  per  1,000  feet  in  the  price  of  gas;  the  plan 
proposed  was  to  give  the  employees  a  bonus  of  '1 
'per  cent  on  their  year's  wages  for  every  penny  re- 
'duction  below  25.  Sd.  per  1,000  feet'  (the  price  then 
being  25.  ^d.).    In  addition,  there  was  to  be  placed 


27 

to  the  credit  of  every  man  who  should  accept  the 
scheme  a  sum  equal  to  what  he  would  have  received 
as  bonus  if  the  scheme  had  been  in  force  during  the 
preceding  three  years,  this  'nest-egg'  being  equiva- 
lent to  9  per  cent  on  one  year's  wages.  In  order  to 
take  the  benefits  conferred  by  the  profit-sharing 
scheme,  the  workman  was  required  to  sign  an  agree- 
ment binding  himself  to  work  for  the  company  for 
twelve  months  at  the  current  rate  of  wages,  the  com- 
pany agreeing  to  employ  him  during  that  period, 
and  also  undertaking  'that  no  alteration  shall  be 
'made  in  the  wages  to  the  disadvantage  of  any  of  the 
'men.'  The  money  coming  to  the  employees  under 
the  scheme  was  not  to  be  withdrawn,  except  in  case 
of  death,  during  the  first  year,  'nor  during  the  first 
'five  years,  except  in  case  of  death,  superannuation, 
'or  leaving  the  service  of  the  company,'  but  was  to 
remain  on  deposit  at  4  per  cent  with  the  company, 
and  was  to  be  forfeited  in  case  of  a  strike  or  wilful 
injury  to  the  company.  Within  a  week  about  1,000 
of  the  regular  workmen  signed  the  agreement;  but 
by  many  of  the  men  much  dissatisfaction  was  felt 
with  the  company's  proposals.  A  very  large  num- 
ber of  stokers,  being  employed  for  the  winter  only, 
found  that  the  scheme  did  not  extend  to  them,  and 
their  hostility  was,  no  doubt,  a  potent  factor  in  pro- 
moting wide-spread  discontent  with  the  project.  In 
consequence  of  a  meeting  between  the  directors  and 
representatives  of  the  workmen  who  had  signed 
agreements,  held  on  November  21,  1889,  the  com.pany 
withdrew  the  clause  under  which  a  man  was  to  for- 
feit his  bonus  in  case  of  strike  or  wilful  injury, 
agreed  to  allow  the  future  annual  bonuses  to  be  paid 
out  in  cash,  and  made  other  modifications  in  order  to 
meet  objections.  The  scheme  w^as  issued  in  a  revised 
form  on  November  27,  1889,  provision  now  being 
made  for  paying  a  bonus  to  workmen  employed  dur- 
ing the  winter  only  (as  well  as  to  the  regular  men), 
subject  to  their  signing  an  agreement  to  serve  the 
company  for  three  months.  However,  the  Gas 
Workers'  Union  manifested  a  strong  aversion  to  the 
scheme  on  a  variety  of  grounds,  the  most  important 
objections  being  that  the  scheme  was  likely  to  in- 
duce men  to  leave  the  Union,  and  that  men  bound 


28 

by  twelve-monthly  agreements,  especially  by  agree- 
ments terminating  at  different  dates,  and  punishable 
for  breach  of  their  contracts  by  penalties  of  a  crimi- 
nalt  as  well  as  of  a  civil  nature,  would  find  it  impos- 
sible to  strike  with  effectiveness,  if  such  a  measure 
should  appear  necessary  with  a  view  to  obtaining 
any  desired  alterations  in  the  conditions  of  employ- 
ment. Accordingly,  the  Union  insisted  that  the 
profit-sharing  scheme  should  be  abolished  ,  and 
[subsequently  explained  to  be  a  mistake  for  or]  that 
the  men  who  had  accepted  it  should  be  removed  from 
the  works;  and  to  enforce  this  demand  over  2,000 
men  (practically  the  whole  of  the  company's 
stokers)  came  out  on  strike  on  December  12,  1889. 
The  company  filled  the  places  of  the  strikers;  and 
the  strike,  having  virtually  worn  itself  out,  came  to 
an  end  on  February  4,  1890. 

' '  The  lines  upon  which  the  profit-sharing  scheme 
was  carried  out  were  materially  changed  in  1894, 
when  it  was  arranged  that  the  rate  of  bonus  should 
be  increased  from  1  to  li/^  per  cent  on  wages  for 
every  penny  at  which  gas  was  sold  below  the  stand- 
ard price;  provided  that,  when  the  rate  of  bonus 
reached  9  per  cent,  the  further  increase  was  to  be  at 
the  old  rate  of  1  per  cent.  The  new  arrangement  ap- 
plied to  employees  who  should  agree  to  have  one- 
half  of  the  whole  amount  of  their  bonus  for  the  cur- 
rent year  invested  for  them  in  the  stock  of  the  com- 
pany; the  bonus  was  to  be  calculated  on  the  daily 
wages,  no  account  being  taken  of  over-time,  and  as 
to  men  on  piece-work,  on  the  amount  the  men  would 
have  earned  at  their  ordinary  rates  in  the  regular 
working  hours;  the  sums  to  be  thus  set  aside  out  of 
bonus  were  to  be  invested  in  the  names  of  trustees 
(three  in  number,  one  director,  one  officer,  and  one 
profit-sharing  workman) ;  and  when  a  man  had  so 
credited  to  him  an  amount  sufficient  to  buy  £5  worth 
of  stock  (the  price  of  which  was  then  £12  155.)  a 
stock  certificate  should  be  issued  in  his  name.  Such 
winter  men  only  as  arranged  to  come  back  the  fol- 
lowing winter  were  allowed  to  have  their  bonus  on 

^Persons  employed  in  gasworks,  such  as  those  of  this  company,  who 
break  a  contract  of  service  can,  under  certain  circumstances,  be  pun- 
ished by  fine  or  imprisonment  under  the  Conspiracy  and  Protection  of 
Property  Act,  1875  (38  and  39  Vict.  c.  86,  sec.  4). 


29 

the  new  scale.  The  company  also  undertook  to  allow 
4  per  cent  interest  upon  all  withdrawable  amounts 
and  any  other  savings,  and  to  arrange  for  the  in- 
vestment of  any  such  sums  in  its  stock  or  shares. 

''The  agreement  which  the  company  required  its 
employees  to  sign  as  a  condition  of  their  participa- 
tion in  profits  required  the  employee  to  state  that  he 
was  not  a  member  of  the  Gas  Workers'  Union  and 
the  continuance  of  his  employment  was  made  condi- 
tional on  his  not  joining  that  Union;  but  these  re- 
strictions were  dropped  many  years  ago.  The  period 
for  which  the  men  engage  themselves  is,  for  the  most 
part,  12  months,  save  in  the  case  of  the  winter  men, 
whose  terms  of  service  vary  from  3  to  6  months. 
The  Rules  of  the  scheme  provided  for  the  appoint- 
ment of  a  Profit-sharing  Committee  (the  name  of 
which  was  in  September,  1903,  changed  to  ' '  Co-part- 
nership Committee")  and  for  the  election  of  auditors 
to  supervise  the  accounts. 

"By  the  Company's  Act  of  Parliament  of  1900 
the  starting  point  of  the  sliding  scale  in  relation  to 
the  dividend  of  the  shareholders  was,  as  from  July 
1,  1901,  lowered  from  35.  6d.  per  1,000  feet  to  35.  Id. 
In  the  revision  of  the  rules  of  the  profit-sharing 
scheme  which  came  into  force  on  the  same  date,  the 
starting  point  of  the  bonus  scale  was  made  35.  Id. 
instead  of  25.  Sd. ;  and  instead  of  the  two  rates  pre- 
viously in  force  (1  per  cent  on  wages  if  all  the  bonus 
were  withdrawn  and  IY2  P^r  cent  if  half  were  in- 
vested in  stock)  bonus  was  fixed  to  be  paid  in  future 
at  one  uniform  rate,  viz.,  three-quarters  of  one  per 
cent  on  wages  for  every  reduction  of  one  penny  in 
the  price  of  gas  below  35.  Id.  per  1,000  feet.  At  the 
same  time  the  investment  of  one-half  of  the  bonus  in 
the  company's  stock  was  made  obligatory  for  all  ex- 
cept the  winter  men,  and  the  minimum  amount  of 
stock  to  be  purchased  out  of  accumulated  bonus  was 
raised  from  £5  to  £10.  Winter  men  under  agree- 
ment were  to  be  entitled  to  the  full  bonus  provided 
they  returned  in  the  following  winter  and  left  the 
withdrawable  half  on  deposit  with  the  company,  the 
other  half  being  invested  in  stock  on  their  behalf.  If, 
however,  they  chose  to  take  the  withdrawable  half 
in  cash,  they  would  not  be  entitled  to  any  investment 
in  stock.    Should  the  half  bonus  at  anv  time  amount 


30 

to  5  per  cent,  the  maximum  payable  to  winter  men 
taking  payment  in  cash  would  be  reached.  With  re- 
gard to  the  disposal  of  their  stock  by  employees  it 
was  now  provided  that  'Any  man  selling  his  stock 
*to  any  outside  party,  without  the  consent  of  the  sec- 
'retary  of  the  company,  will  at  once  cease  to  be  a 
'Profit-sharer  ....  those  who  sell  their  stock 
'except  for  the  best  reasons,  such  as  investing  in  the 
'Building  Society  or  buying  a  house,  and  those  who 
'regularly  withdraw  their  half  bonus,  will  be  struck 
'off  the  list.  They  may,  however,  again  become 
'qualified  by  saving  for  two  consecutive  years  an 
'amount  equal  to  one  week's  wages  in  each  year.' 

"By  the  same  revision  the  rate  of  interest  on 
money  of  the  employees  deposited  with  the  company 
was  made  a  uniform  3  per  cent,  irrespective  of 
amount. 

"By  the  latest  revision  of  the  Co-partnership 
Rules,  which  came  into  force  on  July  1,  1910,  an  im- 
portant alteration  was  made  in  regard  to  the  treat- 
ment of  the  bonus.  Up  till  then,  while  one-half  of 
the  bonus  was  required  to  be  invested  in  the  com- 
pany's stock,  the  other  half  might  either  be  left  on 
deposit  with  the  company  or  invested  in  stock,  or 
might  be  withdrawn  at  a  week's  notice.  Now  it  was 
laid  down  that  this  second  half  of  the  bonus  is  to  be 
'left  in  the  company's  hands  to  accumulate  at  in- 
'terest,  or  it  may  be  invested  in  stock  with  the  trus- 
'tees,  or  it  may  be  withdrawn  under  special  circum- 
*  stances  by  giving  a  week's  notice.' 

"Another  change  made  by  the  1910  revision  was 
the  increase  in  the  number  of  members  of  the  Co- 
partnership Committee  from  36  to  54 ;  and  it  is  pro- 
vided that  'candidates  must  hold  and  continue  to 
'hold  while  in  office  on  the  Committee  not  less  than 
'£25  of  stock,  and  thev  must  have  been  not  less  than 
'five  years  in  the  company's  service.' 

"Speaking  generally,  a  large  part  of  the  func- 
tions of-  the  Co-partnership  Committee  consists  in 
smoothing  away  friction  which  may  arise  between  in- 
dividual workmen  and  their  employers,  and  in  re- 
moving suspicions  entertained  by  a  workman  that  he 
is  not  being  treated  fairly.  For  this  purpose  a  very 
important  part  is  played  by  the  workmen's  repre- 
sentatives on  this  Committee  to  whom  the  workman 
who  thinks  himself  hardly  dealt  with  applies  in  the 


31 

first  instance.  In  very  many  cases  a  talk  between 
the  workman  and  the  representative  on  the  Co-part- 
nership Committee  of  the  class  of  employees  to  which 
he  belongs  suffices  to  allay  the  man's  discontent. 
Should  this  not  be  the  case,  the  next  step  is  for  the 
representative  before  whom  he  has  laid  his  case  to 
put  the  matter  before  the  superintendent  or  other 
official  in  charge  of  the  department  of  the  works  in 
which  the  workman  is  employed.  If  the  interview 
between  the  official  and  the  representative  should  fail 
to  produce  results  satisfactory  to  the  complainant, 
then  the  case  is  brought  before  the  Co-partnership 
Committee.  But  the  necessity  for  this  step  occurs 
but  seldom,  most  cases  being  settled  in  the  manner 
above  mentioned.  When  complaints  come  before  the 
Committee  its  decision  is  always  accepted  without 
demur. 

"On  August  27,  1898,  a  scheme  for  the  election 
by  the  officers  and  workmen  of  the  company  of  em- 
ployee-directors, made  under  the  provisions  of  the 
Company's  Acts  of  1896  and  1897,  came  into  opera- 
tion. This  scheme  was  to  continue  in  force  for  three 
years  (subject  to  cesser,  if  the  amount  of  the  invest- 
ment of  the  employees  in  the  stock  of  the  company 
should  fall  below  the  nominal  amount  of  £40,000), 
and  was  renewed  in  1901.  In  1907  the  scheme  was 
again  renewed  for  a  further  period  of  43  years.  It 
is,  however,  subject  to  prior  determination  should 
the  employee-shareholders  reduce  their  holding  of 
stock  below  certain  specified  limits,  or  should  the 
shareholders  resolve  that  the  Co-partnership  Scheme 
no  longer  answers  its  purpose  of  promoting  a  true 
union  of  employers  and  employed.  Such  resolution 
is  to  be  subject  to  the  approval  of  the  Board  of  Trade. 
"The  number  of  employee  directors  is  not  to  ex- 
ceed three,  of  whom  one  shall  be  a  salaried  officer, 
and  the  other  two  employees  in  receipt  of  weekly 
wages;  and  it  may  be  reduced  below  that  number  if 
the  amount  of  stock  held  by  the  employees  should 
decrease.  At  the  date  of  the  adoption  of  the  1907 
scheme  the  employees  held  stock  of  the  company  to 
the  aggregate  amount  of  approximately  £200,000,  or 
one-thirty-second  of  the  total  capital  of  the  com- 
pany: 


32 

''With  respect  to  the  qualification  of  an  em- 
ployees' director  it  is  provided  that: — 

*'  'The  qualification  of  an  employees'  director 
shall  be  two-fold,  the  having  been  continuously  not 
less  than  14  years  in,  and  continuing  in,  the  employ 
of  the  company  and  the  having  held  for  not  less 
than  12  months  prior  to  the  date  of  election,  and  the 
continuing  to  hold,  not  less  than  £120  stock  of  the 
company,  accumulated  under  the  co-partnership 
scheme.  As  the  aggregate  holding  of  stock  increases, 
so  shall  the  qualification  ...  of  employee 
directors  increase  in  the  following  proportion : 

"Aggregate  holding  £200,000,  qualification,  £120 

£300,000,  "  £140 

£400,000,  "  £160 

£500,000,  ''  £180 

One-tenth  of  capital  or  more,  "  £200.' 

' '  Taking  the  whole  period  during  which  the  profit- 
sharing  scheme  has  been  in  force,  the  bonuses  paid 
under  the  scheme  have  made  an  addition  to  the  wages 
and  salaries  of  the  participants  at  the  average  rate 
of  6.9  per  cent. 

''The  number  of  persons  employed  by  the  com- 
pany in  1911  varied  between  5,534  and  6,704,  of 
whom,  at  the  end  of  1911,  5,800  were  entitled  to 
share  in  profits. 

"In  all,  5,656  of  the  company's  employees  hold  be- 
tween them  ordinary  stock  of  the  company  to  the 
(nominal)  amount  of  £301,490  (of  whom  4,767  hold 
in  their  own  names  £290,700,  the  trustees  holding 
£10,790  on  behalf  of  889  employees). 

"In  addition,  the  company  holds  on  behalf  of 
5,534  of  its  employees  deposits  (accumulated  bonus 
and  other  savings)  to  the  total  amount  of  £54,260. 

"With  regard  to  the  share  in  the  control  of  the 
affairs  of  the  company  possessed  by  its  employees, 
it  is  estimated  that  out  of  the  total  number  of  votes 
which  could  be  given  at  a  general  meeting  of  the 
shareholders  the  proportion  representing  the  voting 
strength  of  the  employee-shareholders  is  about  2  per 
cent ;  while  of  the  ten  directors  of  the  company  three 
(one  official  and  two  workmen)  are  representatives 
elected  by  its  employees. 


33 

'*In  reply  to  the  questions  addressed  to  it  by  the 
Labour  Department  as  to  the  results  of  the  system 
above  described  (asking  whether  the  system  had 
proved  satisfactory,  whether  it  had  called  forth  ex- 
tra zeal,  and  whether  it  had  tended  to  promote  har- 
monious relations  between  employers  and  employed 
and  avoidance  of  strikes  and  disputes)  the  company 
states  'To  all  the  above  questions — Yes.'  " 

Sir  Cheistopher  Furness's  Schemes  for  Labor 

Co-partnership, 
the  wingate  collieries. 

In  May,  1909,  Sir  Christopher  Furness,  with  two  as- 
sociates, acquired  the  extensive  Wingate  Colliery  in  the 
North  of  England  and  submitted  to  the  workmen  there 
employed  an  elaborate  co-partnership  scheme. 

The  plan  was  described  by  Sir  Christopher  Furness, 
in  a  speech  to  his  employees,  as  follows : 

'*1.  While  the  Board  of  Directors  will  retain  for 
the  officials  of  the  company  full  power  to  employ 
men  as  the  circumstances  of  the  moment  may  de- 
termine, the  general  conditions  of  working  and  pay- 
ment accepted  by  the  Miners'  Union  will  be  duly 
recognized.  On  the  other  hand,  it  is  well  that  it 
should  be  understood  from  the  beginning,  that,  in 
view  of  the  advantages  in  which  employees  engaged 
on  the  colliery  will  certainly  share,  as  well  as  other 
benefits  that  may  possibly  accrue  to  them,  our  offi- 
cials will  be  under  strict  injunctions  to  see  that  only 
men  of  capacity  and  industry,  discreet  conduct  and 
sober  habits,  and  regularity  in  hours,  shall  be  re- 
tained in  the  service  of  the  company. 

2.  Every  employee — whatever  his  status  (for  ac- 
cording to  my  standards,  labourers  have  rights 
equally  with  other  members  of  the  working  class 
community) — every  employee,  I  say,  becomes  a  mem- 
ber of  the  co-partnery  by  signifying  assent  to  its 
principles,  and  by  acquiescing  in  the  regular  deduc- 
tion of  5  per  cent  from  his  pay  until  the  shares  to  be 
allotted  to  him,  and  which  he  must  applv  for,  are 
fully  paid,  thus  enabling  him  to  acquire  his  holding 
by  gradual  instalments;  and  no  employee  can  con- 


34 

tinue  in  the  service  of  the  company  for  more  than 
three  months  unless  he  becomes  a  co-partner. 

3.  The  labor  co-partners — who  in  other  respects 
will  be  as  the  workmen  of  other  collieries  in  the 
county  of  Durham,  not  forgetting  the  legal  rights 
conferred  on  employees  by  the  Workmen's  Compen- 
sation Act — will  participate  to  the  extent  of  their 
share  holdings  in  such  profit  as  may  from  time  to 
time  be  paid  in  dividends  by  the  company.  Large 
and  small  shareholders  alike  will  be  placed  on  pre- 
cisely the  same  footing. 

4.  The  control  of  the  company's  affairs  will  be 
vested  in  the  Board  of  Directors,  and  no  one  but  the 
management  will  possess  authority  to  discharge  as 
well  as  to  engage  workmen,  with  responsibility  to 
the  Board  alone.  Alongside  this  form  of  adminis- 
tration, however,  there  will  exist  a  Colliery  Council, 
composed  equally  of  representatives  of  the  directors 
and  representatives  of  the  employees,  which  body 
shall  become  the  repository  of  information  of  im- 
portance  or  interest  that  may  be  communicated  with- 
out injury  to  the  company's  welfare,  shall  have 
power  to  investigate  and  bring  efforts  of  concilia- 
tion and  persuasion  to  bear  upon  matters  that  may 
come  into  controversy  between  employees  and  em- 
ployers or  their  representatives,  and  shall  be  en- 
titled, by  majority  vote,  to  make  representations  and 
offer  counsel  to  the  Board  in  matters  directly  re- 
lating to  the  working  arrangements  and  conditions 
associated  with  the  colliery.  Furthermore,  the  rep- 
resentatives of  the  employees  would  possess  the 
privilege  of  summoning  to  meetings  of  the  Council, 
whenever  their  advice  was  desired,  the  officials  of 
their  trades-unions,  who  would  be  entitled  to  elicit 
information  and  to  address  the  Council  on  the  sub- 
ject occupying  its  attention.  But  these  are  points  of 
detail  which  can  be  settled  in  conference  subsequent- 
ly, should  you  and  your  fellows  resolve  to  co-operate 
in  the  execution  of  the  scheme  I  am  now  propound- 
ing to  you. 

5.  The  above  outlined  arrangement,  alike  in  its 
parts  and  in  its  entirety,  is  subject  to  the  cardinal 
and  supreme  condition,  that  in  acquiescing  in  it,  the 
co-partners,  while  accepting  the  hours,  wages,  and 
other  conditions  of  labour  actually  secured  genera]- 


35 

ly  by  the  employees'  trades-unions  throughout  the 
country,  which  shall  govern  this  compact,  agree  to 
substitute,  on  the  one  part  for  that  barbaric  instru- 
ment the  strike,  and  on  the  other  part  for  the  equally 
out-of-date  instrument  the  lock-out,  conciliation  by 
the  Colliery  Council,  or,  this  failing,  arbitration  by 
a  court  of  representatives  of  employers  and  em- 
ployees and  presided  over  by  the  County  Court 
Judge  of  the  district  or  his  nominee,  the  chairman  of 
such  court  to  be  regarded  in  the  last  resort  as  final 
arbiter  in  all  matters  of  dispute. 

There,  in  substance,  you  possess  the  elements  of 
the  proposition  I  submit  to  you  for  your  considera- 
tion, and  I  am  not  without  hope  that,  in  the  end,  you 
will  concede  that  the  conditions  are  reasonable  and 
just,  and  well  calculated  to  produce  the  results  which 
we  must  all  desire." 

The  plan  was  submitted  to  the  Miners'  Union  and  re- 
jected by  them  and,  in  advising  Sir  Christopher  Furness 
of  the  action  of  the  meeting,  the  chairman  wrote  him : 

'*In  connection  with  our  meeting  on  Tuesday, 
June  22,  to  consider  your  'Co-Partnery  Scheme,'  we 
had  a  representative  from  our  Executive  Council  at 
Durham,  and  after  careful  consideration  of  the 
above,  they  advised  us  to  have  nothing  whatever  to 
do  with  the  same." 

This  incident  is  of  more  than  passing  interest  when 
it  is  considered  in  the  light  of  the  then  existing  relations 
between  Sir  Christopher  Furness  and  the  labor  interests. 
Some  months  previously  he  had  devised  and  put  into  op- 
eration a  similar  plan  at  the  shipbuilding  yards  of  the 
following  company  with  which  he  was  identified. 

Irvin  Shipbuilding  and  Dry  Dock  Company  at  the 

Hartlepools 

In  that  particular  instance  the  co-partnership 
scheme  had  its  genesis  in  the  severe  labor  struggle 
in  the  shipbuilding  industry  on  the  northeast  coast  of 
England  and  on  the  Clyde  in  1908.     The  proposal  for 


36 

the  extension  of  the  system  to  his  coal  mining  industry 
did  not  have  its  origin  in  strife  but  rather  in  the  fact 
that  his  experiment  at  the  shipyards  was  proving  to  be 
an  unqualified  success.  Notwithstanding  the  success  of 
this  scheme  from  the  point  of  view  of  both  the  employer 
and  the  employees,  the  latter  voted  to  discontinue  the 
plan  at  the  end  of  the  year.  This  remarkable  action  on 
the  part  of  the  employees  is  explained  by  Kalph  M. 
Easley  in  a  statement  on  that  subject  made  in  1913,  a 
part  of  which  is  given  below : 

*'A  few  years  ago  I  spent  a  night  at  the  home  of 
Sir  Christopher  Furness,  who  had  worked  out  a  most 
comprehensive  and,  to  my  mind,  fair  and  sane 
scheme  for  profit-sharing.  As  most  of  the  men  in 
his  shipbuilding  yards  belonged  to  the  unions,  he 
started  out  by  insisting  that  all  the  employees  should 
belong  to  a  union  and  he  thought  the  union  officers 
should  be  represented  on  the  board  of  directors  of 
the  shipbuilding  plant  where  he  was  making  the  ex- 
periment. He  had  just  completed  the  first  year  of 
the  plan  and  was  quite  delighted  with  the  outlook 
for  its  success. 

''The  night  before  I  went  out  to  his  place,  how- 
ever, I  had  been  in  the  House  of  Commons  and  had 
there  met  twenty-five  of  the  labour  members  of  Par- 
liament. Nearly  all  of  these  men  had  been  guests  of 
The  National  Civic  Federation  when  Mr.  Alfred 
Mosely  brought  them  over  here  the  year  before. 
There  were  some  thirty  of  them  in  the  United  States 
and  we  sent  them  all  over  the  country.  Included  in 
the  number  was  Mr.  Barnes,  the  head  of  the  Engi- 
neering Society.  I  told  Mr.  Barnes  that  I  was  going 
to  see  Sir  Christopher  Furness,  who  had  invited  me 
to  visit  him  and  talk  over  his  profit-sharing  scheme, 
and  I  asked  him  what  he  thought  of  it.  Mr.  Barnes 
answered:  'There  are  eleven  hundred  of  our  men 
employed  there  and  they  are  all  for  it;  but  I  am 
against  it.'  I  said:  'That's  a  remarkable  situation. 
Why  are  you  against  it?'  This  was  his  reply,  and  I 
think  it  represents  in  a  nutshell  the  view  of  the  entire 
organized  labor  world:  'If  all  the  employers  in 
England  were  as  fairminded  and  as  decent  as  Sir 


37 


Christopher  Furness,  there  would  be  no  use  for  the 
unions  and  we  could  afford  to  disband ;  but,  unfortu- 
nately, all  employers  are  not  of  his  type  and,  if  we 
should  disband  tomorrow,  we  should,  under  eco- 
nomic pressure,  gradually  drift  back  to  where  we 
were  twenty-five  years  ago,  or  worse.  Now,  if  we 
are  to  exist,  we  must  have  members  and  those  mem- 
bers have  to  pay  dues.  If  those  members  come  to 
think  that  profit-sharing  is  going  to  take  care  of 
them,  then  they  are  not  going  to  pay  dues  and  the 
organization,  as  a  result,  would  go  out  of  business, 
and  there  you  are.' 

"Now,  however  selfish  some  persons  may  con- 
sider that  position,  those  of  us  who  believe  that  the 
unions  are  performing  a  great  service  to  society  in 
helping  to  improve  the  conditions  of  the  working 
man,  must  face  one  of  two  alternatives.  We  must 
either  accept  the  view  that  in  fighting  for  the  life  of 
the  trade  union  they  arc  doing  a  worthy  thing  and 
ought  to  be  supported,  or  the  view  that  it  would  be 
better  for  the  wage-earning  class,  as  a  whole,  to 
'smash  the  unions'  and  take  a  chance  on  the  gener- 
osity of  the  employers  to  see  that  the  wage-earner 
receives  his  full  due. 

''A  few  months  later  the  whole  scheme  of  profit- 
sharing  in  Sir  Christopher  Furness 's  shipbuilding 
yards  came  to  an  end,  for  the  reason  that  Mr.  Barnes 
had  persuaded  his  men  to  decline  to  renew  the  agree- 
ment. 

"Those  who  would  'smash  the  unions'  (and  I 
do  not  mean  that  in  an  offensive  way)  must  realize 
that  organizations  of  labor  are  increasing  in  strength 
and  not  decreasing.  The  American  Federation  of 
Labor  has  added  to  its  membership  over  five  hundred 
thousand  members  in  the  last  four  years,  and  there 
are  no  sisrns  of  disintegration  in  the  ranks  of  the 
railway  brotherhood^^.  In  fact,  they  are  stronger 
today  than  ever  before." 

Lever  Brothers,  Limited, 
soap  manufacturers.    port  sunlight,  england.    1909. 

A  profit-sharing  plan  in  the  form  of  a  "Co-partner- 
ship Trust"  was  put  in  operation  by  Sir  William  Lever 


38 

in  1909  at  the  several  plants  owned  or  controlled  by  the 
firm  within  the  United  Kingdom,  and  extended  in  1910 
to  employees  of  its  factories  in  other  parts  of  the  world. 
One  of  these  is  located  in  Cambridge,  Mass. 

It  is  expressly  provided  in  the  company's  Articles  of 
Association  that  the  ''partnership"  plan  is  not  to  be 
construed  as  creating  an  actual  partnership  in  law  be- 
tween the  company  and  any  person  interested  under  the 
scheme. 

For  the  purposes  of  the  plan  "preferential"  certifi- 
cates and  "partnership"  certificates  are  issued,  the  lat- 
ter for  a  nominal  amount  up  to  £1,000,000.  These  certifi- 
cates have  no  cash  value  but  are  designed  merely  as  a 
measure  of  the  dividend  which  may  be  payable  to  the 
employee-partner,  so-called.  The  certificates  draw  divi- 
dends at  a  rate  5%  less  than  that  paid  on  the  company's 
ordinary  shares.  For  example,  when  the  ordinary 
dividends  amount  to  15%,  the  dividend  on  partnership 
certificates  is  10%.  The  distribution  of  certificates  is 
made  annually  on  the  basis,  approximately,  of  10%  of 
the  employee 's  wages,  and  the  maximum  face  value  which 
may  be  issued  ranges  from  £200.  in  the  case  of  employees 
whose  annual  wages  are  £100.  or  less,  to  £3000.  in  the 
ease  of  those  whose  salaries  are  £750.  or  more. 

The  preferential  certificates  may  be  issued,  at  the  dis- 
cretion of  the  holder  of  the  majority  stock  of  the  com- 
pany, to  any  institution  whose  object  is  the  betterment 
or  advantage  of  employees  of  Lever  Brothers,  such  as 
the  church,  schools,  club  and  parks.  These  certificates 
bear  interest  at  5%.  The  partnership  certificates  are  is- 
sued to  employees,  subject  to  the  maximum  scale  re- 
ferred to,  applying  to  four  stated  classes  of  beneficiaries. 
These  classes  are  (1)  directors,  (2)  managers,  (3)  sales- 
men, and  (4)  the  general  staff  of  workmen.  The  issue 
of  certificates  to  each  of  these  groups  is  not  to  exceed 
one-fourth  of  the  total  authorized  issue  for  the  time 
being. 


39 

The  payments  to  certificate  holders  are  made  through 
a  board  of  trustees,  composed  of  the  directors  of  the  com- 
pany with  the  exception  of  the  founder,  Sir  William 
Lever.  The  allotment  is  according  to  the  individual  mer- 
its of  the  applicants,  who  must  be  at  least  25  years  of 
age,  of  good  character  and  a  clear  record  of  at  least  four 
years  faithful  service.  In  the  original  plan  the  limita- 
tion was  five  years.  Beneficiaries  must  agree  to  be 
bound  by  the  provisions  of  the  trust  and  the  sciieme,  and 
undertake  to  render  careful  and  loyal  service. 

Certificates  may  be  cancelled  in  case  of  neglect  of 
duty,  dishonesty,  immorality,  flagrant  inefficiency,  dis- 
loyalty or  other  breach  of  the  trust  agreement,  or  in  case 
of  voluntary  withdrawal  from  the  company's  service. 
The  widow  of  a  deceased  employee  receives  a  preferen- 
tial certificate  in  exchange  for  the  partnership  certificate 
formerly  held  by  her  husband,  and  the  same  privilege  is 
extended  to  employees  who  are  obliged  to  retire  for  ill 
health  or  who  are  dismissed  through  no  fault  of  their 
own.  All  decisions  in  individual  cases  are  made  first  by 
the  trustees,  but  appeal  may  be  taken  to  a  committee  of 
twelve,  made  up  of  three  members  from  each  of  the  four 
classes  of  employees  above  designated.  In  case  the  trus- 
tees do  not  accept  the  action  of  this  committee,  the  mat- 
ter goes  to  the  chairman  of  the  company  for  final  de- 
cision. Acceptance  of  partnership  certificates  binds  the 
beneficiary  to  abide  by  the  results  of  this  method  of 
adjustment,  without  any  appeal  to  a  court  of  law. 

The  scheme  has  been  recently  changed  to  provide  that 
** partner-employees"  may  be  paid  their  dividends  in  5% 
cumulative  preferred  shares  of  the  company,  which  may 
be  sold  at  the  employee's  option,  but  to  induce  him  to 
retain  them  it  is  arranged  that  if  not  sold  they  will  draw 
a  dividend  equal  to  that  paid  on  the  partnership 
certificates. 

It  is  stated  that  since  the  adoption  of  the  system  the 
volume  of  business,  the  profits  and  the  capital  have  each 
more  than  doubled,  and  that  the  payment  of  dividends  to 


40 

employees  has  not  been  obtained  by  cutting  down  wages. 
On  the  contrary,  since  1908  the  wages  for  unskilled  labor, 
including  the  war  bonus,  have  increased  by  55%. 

There  are  at  present  more  than  3,400  holders  of  part- 
nership or  preferential  certificates,  and  included  in  this 
total  are  nearly  800  co-partners  admitted  in  December, 
1915.  There  were  in  1911  about  11,500  employees  of  the 
firm  throughout  the  world,  which  number  has  pre- 
sumably largely  increased  with  the  growing  volume  of 
business  in  recent  years.  Probably  a  conservative  esti- 
mate would  be  that  about  one-fourth  of  the  total  number 
of  employees  are  beneficiaries  under  the  co-partnership 
plan. 

The  opinion  of  Sir  William  Lever  is  quoted  in  the 
British  Board  of  Trade  Eeport  of  1912,  on  "Profit-Shar- 
ing and  Labour  Co-Partnership  in  the  United  King- 
dom," to  the  effect  that  "with  the  majority  the  Scheme 
does  increase  their  sense  of  responsibility  and  loyalty  to 
the  firm,  perseverance  and  assiduity  in  discharge  of 
duties.  He  would  not  abandon  it,  nor  has  he  any  desire 
to  go  back  to  the  days  before  the  Scheme. ' ' 

The  amount  of  dividends  paid  out  thus  far  to  co-part- 
ners exceeds  £200,000.  Port  Sunlight,  the  headquart- 
ers of  the  business,  is  described  by  Sir  Stephen  Collins, 
M.  P.,  as  "a  beautiful  model  village,  second  to  none  in 
the  world,  with  its  four  thousand  odd  of  contented 
people,  its  art  galleries,  museums,  schools,  hospital,  and 
its  various  institutions  for  the  uplifting  of  the  people, 
with  a  birth  rate  ....  of  26.8  and  a  death  rate  of  about 
8.19."  Sir  William  Lever,  in  describing  the  origin  of  his 
co-partnership  idea,  traces  it  to  the  necessity  of  moving 
the  growing  business  to  a  country  location,  which  involved 
the  provision  of  housing  for  the  employees,  with  the  ad- 
dition of  the  welfare  features  above  noted.  But  it  was 
seen  that  these  advantages  could  be  applied  only  to  those 
immediately  occupied  in  the  industry  at  one  spot,  and 
did  not  include  those  who  could  not  live  near  Port  Sun- 


41 

light.    For  this  reason  he  adopted  profit   sharing,  as   a 
means  of  reaching  all  the  employees  of  the  company. 

He  calls  attention  to  the  fact  that  while  the  average 
life  of  profit-sharing  and  labor  co-partnership  schemes, 
according  to  government  reports,  is  five  years,  this  plan 
has  continued  in  successful  operation  for  seven  years 
with  every  prospect  of  permanency.  It  is  his  belief  that 
such  a  scheme  must  not  be  a  matter  of  philanthropy,  but 
must  find  its  justification  in  greater  efficiency  and  in- 
creased prosperity  of  the  business.  To  this  end,  the  in- 
fluence of  the  management  must  not  be  weakened,  be- 
cause: ''When  a  business  is  run  on  Co-Partnership  lines, 
there  must  be  just  the  same  loyalty  to  the  Chairman, 
Board  of  Directors,  and  Managers  of  the  business  as 
before,  and  even  more,  if  it  is  to  be  a  success." 


42 


AMERICAN  SYSTEMS. 

EARLY  DEVELOPMENT 

In  1867,  the  Bay  State  Shoe  and  Leather  Company, 
adopted  a  plan  by  which  the  employees  received  25%  of 
the  net  profits  of  the  company.  This  plan  continued  in 
operation  for  a  period  of  six  years  and  was  abandoned 
because  the  employees  struck  for  higher  wages. 

A.  S.  Cameron  &  Company. 

In  1869,  A.  S.  Cameron  &  Co.  of  Jersey  City,  New 
Jersey,  manufacturers  of  machinery,  adopted  a  plan  of 
distributing  10%  of  the  net  profits  of  the  business 
among  the  workmen.  The  plan  continued  in  operation 
until  1877,  when  the  business  passed  into  other  hands  on 
the  death  of  Mr.  Cameron. 

Brewster  &  Company. 

In  1870,  Brewster  &  Co.  the  New  York  firm  of  car- 
riage builders  adopted  a  profit  sharing  plan  which  is 
hereinafter  described  in  detail. 

Peace  Dale  Manufacturing  Company. 

In  1878,  the  Peace  Dale  Manufacturing  Company  of 
Peace  Dale,  Khode  Island,  put  into  operation   a   profit 
sharing  scheme,  which  continued  for  many  years,  and 
during  a  large  part  of  which  time  there  were  no  profits  \^ 
for  the  employees. 

Rand  McNally  &  Company. 

In  1879,  Rand  McNally  &  Company  of  Chicago  adopt- 
ed a  profit  sharing  scheme  by  a  distribution  of  stock  in 
the  company  among  the  employees.  The  outline  occurs 
in  section  devoted  to  Stock  Ownership  Plans. 


I  43 

N.  0.  Nelson  Manufacturing  Company. 

In  1886,  the  N.  0.  Nelson  Manufacturing  Company, 
of  St.  Louis,  Missouri,  and  Leclaire,  111.,  adopted  a  plan 
whicb  is  still  in  operation,  and  is  hereinafter  described 
in  detail. 

Proctor  &  Gamble  Company. 

In  1887,  Proctor  &  Gamble  Company,  of  Ivorydale, 
Ohio,  adopted  a  plan  which  as  later  modified,  has  been 
carried  on  by  this  company  up  to  the  present  time,  and 
is  analyzed  in  this  report. 

ANALYSES  OF  PRESENT  METHODS. 

Relatively  few  of  the  plans  adopted  by  American  em- 
ployers for  the  purpose  of  giving  employees  an  addition 
to  their  regular  wages  can  be  properly  classed  as  profit 
sharing  within  the  meaning  of  the  definitions  hereinbe- 
fore quoted. 

For  convenience  of  classification  these  plans  have 
been  grouped  under  six  main  heads  which  may  be  de- 
scribed generally  as  Percentage  of  Profits,  Special  Dis- 
tributions, Stock  Ownership,  Exceptional,  Abandoned 
and  Proposed  Plans. 

The  year  in  which  profit  sharing  was  begun  is  men- 
tioned, where  known,  in  the  headings.  The  companies 
are  arranged  alphabetically  in  the  several  sections  and 
are  therefore  easily  to  be  found.  Consequently,  an  index 
has  not  been  included. 

These  analyses  in  the  main  have  been  prepared  from 
the  latest  data  furnished  by  the  concerns  themselves. 
The  few  exceptions,  taken  from  newspaper  accounts,  are 
direct  quotations  from  notices  issued  by  the  companies 
in  question  and  may,  therefore,  be  regarded  as  authen- 
tic. Many  were  omitted  because  press  accounts  were  not 
confirmed.  A  few  given  emphasis  by  N.  P.  Gilman,  are 
mentioned,  with  due  credit,  merely  to  make  the  record  of 
institutions,  widely  commented  upon,  complete  in  this 
report  but  they  may  not  exist  at  this  time. 


44 

PERCENTAGE  OF  PROFITS. 

A  large  number  of  plans  are  based  in  a  more  or  less 
indefinite  way  upon  "percentage  of  profits",  but  in  very 
few  cases  is  this  percentage  ''fixed  in  advance"  accord- 
ing to  the  standard  definition.  In  some  instances,  the 
percentage  is  determined  at  the  end  of  the  year  after  the 
results  of  the  season's  business  are  known,  and  in  a  few 
cases  the  plan  is  followed  of  reserving  fixed  rates  of  in- 
terest or  dividend  on  capital  and  dividing  the  entire  bal- 
ance of  surplus  earnings,  whatever  it  may  be,  between 
the  stockholders  and  the  employees. 

The  following  analyses  come  within  this  general 
classification : 

American   Light  &  Traction   Company. 

NEW  YORK  CITY. 

This  company  controls  a  number  of  lighting  and  trac- 
tion properties  throughout  the  country,  and  several  of 
these  share  profits  with  their  employees.  It  is  stated 
that  none  of  the  companies  which  have  once  introduced 
profit  sharing  has  ever  abandoned  it,  although  some  of 
them  have  since  been  sold  to  other  interests.  In  the  case 
of  one  company,  acquired  about  ten  years  ago,  a  strike 
occurred  before  the  property  had  been  under  the  new 
ownership  long  enough  to  entitle  the  men  to  receive  wage 
dividends,  and  therefore  none  was  paid.  In  another 
instance,  it  is  stated  that  the  wages  prevailing  at  the 
time  the  plant  was  acquired  were  higher  than  those  paid 
to  employees  of  other  properties,  even  with  a  wage  divi- 
dend added,  and  accordingly  profit  sharing  was  not  estab- 
lished in  this  case.  The  number  of  employees  affected 
by  profit  sharing  in  all  the  auxiliary  companies  where  the 
plan  is  in  operation  is  estimated  at  7,000. 

Mr.  Emerson  McMillin,  formerly  president  of  all  these 
companies,  states  that  the  only  weakness  which  has  de- 
veloped in  the  wage-dividend  plan,  in  his  judgment,  has 
arisen  from  the  local  policy  adopted  in  certain  cases  of 

I 


45 

contiuuing  dividends  to  the  employees  without  change,  in 
years  when  circumstances  compelled  a  reduction  in  the 
rate  paid  to  stockholders,  the  theory  of  all  these  plans 
being  an  equal  percentage  to  both.  This  action,  growing 
out  of  sympathetic  consideration  for  the  men,  neverthe- 
less destroyed  the  spirit  of  the  plan  and  led  the  employees 
to  regard  the  dividend  as  a  part  of  their  wages,  encour- 
aging the  idea  that  it  did  not  matter  whether  good  and 
intelligent  service  were  rendered  or  not,  the  bonus  would 
be  received  just  the  same. 

A  wage  dividend  plan  typical  in  most  respects  to  those 
of  all  the  affiliated  companies  is  that  of  the  Grand  Rapids 
Gas  Light  Company.  Since  1899  this  company  has  paid 
semi-annual  dividends  on  the  wages  of  employees  at  a  per- 
centage at  least  equal  to  that  declared  on  the  company's 
stock  for  the  same  period.  The  intent  was  declared  to 
be  the  rewarding  of  continuous  and  faithful  service,  and 
in  order  to  participate  employees  must  have  been  in  the 
service  at  least  18  months  preceding  the  payment  of  the 
extra  award.  The  directors  reserved  the  right  to  deter- 
mine when,  to  whom  and  how  these  payments  should  be 
made,  and  to  discontinue  the  plan  at  any  time.  Em- 
ployees who  resign  or  are  discharged  for  cause  do  not 
share  in  the  distribution  for  the  half  year.  The  plan  at 
first  excluded  all  executive  officers,  but  several  changes 
have  been  made  in  this  respect,  and  at  present  the  secre- 
tar3%  treasurer  and  general  manager  are  entitled  to  par- 
ticipate. The  wage  dividends  paid  under  this  plan  have 
ranged  from  6  to  10%  per  annum. 

There  is  also  in  effect  a  stock  subscription  plan,  under 
which  the  officers  and  heads  of  departments  of  the  Ameri- 
can Light  &  Traction  Company  and  of  the  auxiliary  prop- 
erties are  enabled  to  purchase  common  stock  of  their  re- 
spective companies  at  a  little  less  than  the  market  price, 
and  to  pay  for  it  in  quarterly  installments.  These  pay- 
ments must  aggregate  a  sum  tliat  will  equal  10%  of  the 
subscriber's  annual  salary,  and  the  purchase  must  be 
completed  within  and  extend  over  a  period  of  ten  years. 


46 

The  company  retains  thiB  stock  in  the  subscriber's  name 
until  it  is  paid  for  in  full,  charging  5%  interest  on  the 
unpaid  balances  during  the  purchase  period.  Dividends 
declared  otherwise  than  in  cash,  such  as  stock  dividends, 
if  any,  are  retained  by  the  company  for  delivery  to  the 
employee  when  he  has  completed  the  payments  which 
entitle  him  to  receive  the  stock  subscribed  for,  but  cash 
dividends  are  paid  direct  to  the  subscriber.  It  is  stated 
that  some  of  the  beneficiaries  have  in  this  way  obtained 
stock  upon  which  their  dividends  now  exceed  their  sal- 
aries, and  that  the  plan  is  wholly  successful. 

American  Manufacturin-g  Concern, 
wood  novelties.    falconer,  n.  y.    1916. 

Ten  per  cent  of  the  net  earnings  of  the  company  will 
be  divided  among  the  employees  annually,  according  to 
notices  posted  in  December,  1915.  One-third  of  the 
amount  distributed  will  go  to  the  foremen  and  two-thirds 
to  the  workingmen.  The  apportionment  is  pro  rata 
according  to  the  individual  yearly  earnings  of  each 
employee.  The  first  payment  under  the  plan  will  be  on 
May  1,  1917,  on  the  basis  of  the  1916  earnings.  About 
200  employees  will  be  affected. 

^^^-X      The  American  Rolling  Mill  Company. 

MIDDLETOWN,  OHIO.     1909. 

This  plan  applies  to  heads  of  departments  and  all 
salaried  employees  receiving  $100  or  more  per  month. 
Employees  affected  by  this  plan  who  are  in  the  service 
of  the  company  on  July  1,  the  beginning  of  its  fiscal  year, 
with  every  intention  of  so  continuing,  and  whose  record 
covering  their  past  year's  work  is  satisfactory  to  the 
board  of  managing  officers,  are  permitted  to  participate 
in  the  "Net  Profits"  of  the  company  to  the  extent  of  a 
specified  percentage  (say,  for  instance,  one-tenth  of  one 
per  cent)  the  amount  being  fixed  separately  in  each  case 
in  proportion  to  the  duties  and  responsibilities  of  the 
position  held. 


47 

By  "net  profits"  the  company  means  the  net  amount 
available  after  all  fixed  charges,  reserve  funds,  deprecia- 
tion and  dividends  or  interest  on  Preferred  Securities 
have  been  reserved  or  paid.  Amounts  due  employees 
under  this  plan  are  payable  in  cash  on  the  day  preceding 
Thanksgiving.        / 

Conditional  Bonus. 

All  salaried  employees  not  included  in  the  percentage 
of  profits  plan  are  paid  a  certain  percentage  on  yearly 
salaries,  based  on  term  and  character  of  service.  Term 
of  service  means  continuous  uninterrupted  service. 

All  salaried  employees  of  the  company,  as  described 
above,  who  are  in  its  service  on  July  1  of  each  year,  whose 
work  has  been  satisfactory  to  their  superior  officers,  who 
intend  to  remain  in  the  service  of  the  company  for  the 
ensuing  year,  and  who  have  been  with  it  continuously 
as  salaried  employees  for  at  least  eighteen  months  and 
under  two  and  one-half  years,  are  allowed  a  sum  equal 
to  5%  on  the  amount  of  their  salaries  for  the  preceding 
year ;  those  employed  not  less  than  two  and  one-half  and 
under  five  years,  10% ;  not  less  than  five  and  under  ten 
years,  121/2%;  ten  years  or  more,  15%. 

The  company  states  that  the  salaries  are  regulated 
after  giving  due  consideration  to  term  of  service,  respon- 
sibility of  position,  efficiency,  loyalty  and  general  ability 
shown  in  the  discharge  of  duties  assigned,  and  independ- 
ent of  any  profit  sharing  plan. 

Ballard  &  Ballaed  Company, 
flour  millers.    louisville,  ky.    1886. 

Employees  who  have  worked  for  the  company  two 
years  begin  to  participate  in  an  amount  equal  to  10  per 
cent  of  the  net  profits  of  the  company  for  the  previous 
year.  They  participate  in  this  10  per  cent  dividend  in 
proportion  to  wages  received  by  them.  Special  provision 
is  also  made  for  a  limited  number  of  trusted  employees 
who  receive  anywhere  from  1  per  cent  to  5  per  cent  of 


48 

the  profits  in  addition  to  their  salaries.  The  total  dis- 
tribution to  employees  amounts  to  about  46  per  cent  of 
the  net  profits. 

There  is  also  an  arrangement  whereby  the  salaries  of 
the  employees  are  automatically  increased  from  year  to 
year,  aside  from  the  dividend  plan. 

.  The  company  reports  that  they  have  never  had  any 
labor  troubles  of  their  own  and  that,  ''while  their  plan 
does  not  reach  the  rank  and  file,  so  well  as  it  does  the 
foremen  and  heads  of  the  departments,  they  still  regard 
it  as  a  very  great  advantage  in  their  friendly  relations 
with  their  men.  There  may  be  a  very  few  of  the  younger 
or  more  recently  employed  men,  who  do  not  seem  to  value 
this  participation  in  the  profits,  but  after  a  few  years 
of  service  it  seems  to  be  of  real  value  in  retaining  the 
loyalty  of  the  men. ' ' 

Barcalo  Manufacturing  Company. 

brass  and  iron  beds,  springs,  mattresses,  hammocks, 

etc.    buffalo,  n.  y. 

This  plan  applies  only  to  the  principal  employees; 
those  who,  next  to  the  directors,  are  responsible  for  the 
activities  of  the  company's  affairs.  They  receive  a  per- 
centage of  all  profits,  and  this  is  paid  to  them  the  last 
day  of  the  year  and  before  any  of  the  earnings  are  set 
aside  for  regular  dividend  purposes. 

Most  of  the  400  employees  work  under  Taylor  methods 
of  scientific  management. 

K.  A.  Baetley. 

WHOLESALE  GROCER.     TOLEDO,   OHIO.     1904. 

The  proprietor  takes  the  legal  rate  of  interest  on  his 
investment  in  the  business  as  his  share  of  the  profits, 
after  deducting  his  living  expenses  and  a  benevolent 
fund.  The  balance  of  the  net  profit  is  divided  equally 
among  all  employees  who  have  been  in  the  service  one 
year  or  over.  The  lowest  salaried  man  receives  the  same 
share  as  the  highest,  and  in  1914  this  amounted  to  $626 


49 

to  each  employee,  in  addition  to  salary.  Since  1904, 
profits  amounting  to  $158,629.07  have  been  divided  among 
the  employees.  In  1908,  no  profits  were  divided  owing 
to  losses  by  fire. 

Benoit  System. 
men's  and  boys'  clothes.    malden,  mass. 

The  company  has  recently  adopted  a  plan  by  which 
all  of  the  employees,  including  the  janitor,  share  in  the 
earnings  of  the  store.  At  the  end  of  the  fiscal  year  10% 
of  the  net  earnings,  based  on  wages,  is  divided  amongst 
all  of  the  employees  and  paid  in  cash. 

BiNG  AND  BiNG.  ^ 

REAL  ESTATE  AND  CONTRACTING.     NEW  YORK  CITY.     1914. 

A  profit  fund,  consisting  of  35%  of  the  annual  net 
profits,  is  set  aside  each  year  for  distribution  among 
permanent  employees  such  as  superintendents,  assistant 
superintendents,  foremen,  time-keepers  and  office  em- 
ployees. Thirty  per  cent  of  this  fund  is  distributed  in 
cash  proportionately  to  the  various  salaries,  except  that 
in  computing  the  allotment  10%  is  added  to  the  yearly 
salary  of  each  participant  for  every  added  year  of  his 
employment.  The  remaining  lO'/o  of  the  fund  is  divided 
among  such  of  the  employees  and  in  such  proportions  as 
the  firm  may  determine. 

Only  one-fourth  of  the  share  to  each  participant  is 
paid  in  cash.  The  balance  is  placed  to  his  credit  and 
bears  interest  at  6%.  The  principal  may  not  be  with- 
drawn so  long  as  the  employee  remains  with  the  firm,  but 
the  firm  may  pay  him  the  entire  amount  at  any  time,  at 
its  discretion.  When  an  employee  leaves  the  firm's  ser- 
vice, the  amount  to  his  credit  shall  be  paid  him  within 
ninety  days. 

The  firm  will  submit  its  books  to  the  employees  to 
verify  the  computation  of  profits. 

Plans  are  being  considered  for  a  profit  sharing  system 
which  will  include  all  the  employees. 


50 
J.  B.  Blood  Company. 

LYNN,  MASS.     1909. 

Three  thousand  so-called  "profit  shares"  are  issued 
by  the  company  to  its  employees  in  such  proportions  as  it 
deems  advisable.  These  certificates  entitle  the  owners, 
at  the  close  of  the  year,  to  a  proportionate  share  in  a 
fund  set  apart  by  the  company,  equal  to  not  less  than  one- 
fourth  of  the  net  profits  of  the  business.  The  company 
may,  at  its  discretion,  withdraw  any  employee's  shares, 
even  if  he  remains  an  employee.  The  shares  are  not 
transferable  nor  is  the  right  to  receive  profits  assign- 
able. 

Ownership  of  shares  ceases  upon  the  death  of  an  em- 
ployee, or  in  case  he  leaves  the  company's  service  or  is 
discharged,  ''even  for  justifiable  cause".  Employees  so 
discharged,  or  the  representatives  of  those  employees  who 
die  during  the  year,  receive  a  proportionate  share  of  the 
profits  for  the  portion  of  the  year  they  were  actually 
employed. 

The  company  reserves  **the  full  right  to  make  such 
modification  in  the  salaries  of  employees  as  it  sees  fit,  not 
inconsistent  with  the  by-laws,"  and  "may  at  any  time  ter- 
minate the  agreement  and  all  right  to  share  in  the  profits. 
If  notice  to  terminate  is  given  in  any  year  before  July  1, 
it  shall  operate  as  of  the  commencement  of  the  profit  year. 
If  such  notice  is  given  after  July  1,  it  shall  take  effect  at 
the  close  of  the  then  current  year." 

Boston  Consolidated  Gas  Company, 
boston,  mass.  1906. 
By  the  so-called  Sliding  Scale  Act,  passed  by  the  Mas- 
sachusetts Legislature  in  1906,  the  future  divisible  profits 
of  the  company  are  made  to  depend  upon  the  price 
charged  for  gas.  The  standard  fixed  by  this  act  is  ninety 
cents  per  1000  cubic  feet  of  gas,  with  dividends  to  the 
stockholders  at  the  rate  of  7%  per  annum.  For  every  re- 
duction of  five  cents  below  ninety  cents  per  1,000  cubic 
feet  the  company  may  pay  1%  additional  dividend. 


51 

This  act  does  not  apply  the  principle  of  the  sliding 
scale  to  employees  of  the  company,  but  on  July  26,  1906, 
the  directors,  adopting  this  principle,  decided  to  offer  to 
the  most  efficient  employees  over  and  above  their  regular 
compensation  an  annual  share  in  the  profits  of  the  com- 
pany, to  be  called  a  ''premium."  Premiums  are  cal- 
culated on  the  annual  salaries  or  earnings  at  the  same 
rate  as  the  dividends  on  the  stock  of  the  company  for  the 
preceding  year.  In  its  announcement  of  this  plan  the 
company  points  out  that  increases  in  the  premium  rate 
to  employees,  like  increases  in  dividends  to  stockholders, 
depend  upon  reductions  in  the  price  of  gas,  which  in  turn 
depend  upon  increased  business  and  improved  economies 
in  operation.  ''Consequently  there  is  a  very  direct  re- 
lation between  the  collective  efficiency  of  the  employees 
and  the  percentage  of  the  apportionment,  which  should 
result  in  increased  effort  on  their  part  to  reduce  the  price 
of  gas  and  thus  increase  their  proportion  of  the  profits." 

All  employees  who  have  been  in  the  employ  of  the  com- 
pany for  one  year  preceding  July  1  of  any  year  in  which 
a  premium  is  declared,  are  eligible  to  participate  in  the 
profit-sharing,  provided,  in  each  case,  that  the  work  of  the 
employee  has  been,  in  the  judgment  of  the  heads  of  de- 
partments, such  as  to  warrant  participation.  No  deduc- 
tion is  made  on  account  of  sickness  except  for  the 
excess  above  two  months'  absence. 

A  separate  premium  account,  showing  principal  and 
interest  and  debit  charges,  is  kept  by  the  company  for 
each  employee  who  receives  a  premium.  After  the  de- 
claration of  a  premium  to  any  employee,  the  amount  of 
such  premium  is  placed  to  his  credit. 

When  the  amount  credited  to  any  employee  is  sufficient 
to  purchase  one  or  more  preferred  shares  of  the  capital 
stock  of  the  Massachusetts  Gas  Companies,  at  the  then 
market  price,  the  president  of  the  company,  at  his  discre- 
tion, either  (1)  pays  to  the  employee  in  cash  the  amount 
of  such  premium  or  premiums  or  (2)  purchases  one  or 
more  of  said  preferred  shares  at  the  then  market  price 


52 

for  and  on  the  account  of  the  employee.  The  amount  so 
expended  is  charged  to  the  premium  account  of  the  em- 
ployee ;  the  shares  so  purchased  are  delivered  to  him  and 
become  his  absolute  property. 

Any  premium  or  premiums  or  portions  thereof,  not 
disposed  of  under  the  above  rule,  remain  to  the  credit  of 
the  employee  on  the  books  of  the  company.  On  all  such 
balances  it  pays  interest  at  the  rate  of  4%  per  annum. 

As  all  shares  bought  for  employees  in  the  above  man- 
ner are  their  absolute  property,  they  may  sell  such  shares 
at  any  time.  Before  such  sale,  however,  at  least  seven 
days'  notice  in  writing  must  be  given  to  the  treasurer  of 
the  company  on  blanks  furnished  by  it  for  that  purpose, 
and  if  the  sale  does  not  receive  the  approval  of  the  direc- 
tors the  employee  selling  may  be  dropped  from  the  list  of 
profit  sharers  for  at  least  one  year. 

The  company  has  on  an  average  from  1,000  to  1,100 
employees,  of  whom  about  650  are  profit  sharers.  From 
June  30, 1907,  to  June  30,  1915,  the  company  apportioned 
to  the  credit  of  the  profit  sharers'  account  $420,813.16,  the 
average  amount  credited  to  each  profit  sharing  em- 
ployee's account  being  $676.55,  or  nearly  75%  of  his 
yearly  wages.  The  average  weekly  wages  of  these  em- 
ployees is  $17.41.  Up  to  June  30,  1915,  3,516  shares  of 
stock  had  been  distributed  to  employees,  the  average  hold- 
ing being  5.36  shares,  and  on  that  date  the  total  of  cash 
and  stock  to  the  credit  of  the  profit  sharers  was 
$337,442.26. 

The  company  states  that  it  is  the  intention  and  desire 
of  the  directors  to  include  as  profit  sharers  all  employees 
who  are,  in  their  judgment,  temperate,  energetic,  honest, 
capable  and  efficient,  but  the  right  is  reserved  to  fix  the 
number  who  shall  receive  premiums  in  any  year. 

In  the  prospectus  of  1911  describing  the  system,  it  was 
stated  that  the  logical  extension  of  the  plan  by  which  em- 
ployees secure  ownership  in  the  business  is  to  have  them 
represented  on  the  board  of  directors  in  order  that  they 
may  have  a  voice  in  the  management  of  the  company.    Ac- 


53 

cordingly  the  company  invited  the  nomination  on  the  part 
of  the  profit  sharers  of  a  representative  of  their  own 
selection,  as  a  director,  with  full  voting  powers.  This 
invitation  was  accepted,  and  the  present  director  is  a  man 
who  has  been  in  the  employ  of  the  company  sixty-five 
years. 

Bourne  Mills, 
cotton  manufacture.   fall  river,  mass.    1889. 

Every  employee  who  continues  faithfully  at  work  dur- 
ing any  term  of  six  months  is  entitled  to  a  share  of  the 
profits  in  proportion  to  the  dividends  paid  to  the  stock- 
holders. The  employee's  share  is  in  the  form  of  a  divi- 
dend on  his  wages,  calculated  by  dividing  a  certain  per- 
centage (not  less  than  six  nor  more  than  twenty)  of  the 
amount  paid  to  stockholders  by  the  total  wages  of  the 
employees  entitled  to  share.  The  amount  of  each  indi- 
vidual's wages  is  multiplied  by  this  rate  to  determine  his 
share.  The  directors  vote  every  six  months  on  the  reten- 
tion of  the  plan.    The  company  has  about  600  employees. 

The  plan  is  one  of  the  oldest  in  the  United  States, 
having  been  in  continuous  duration  since  1889,  with  the 
exception  of  the  year  1904.  The  rate  of  dividend  to 
employees  has  ranged  from  2 1/0%  to  7%. 

Tn  May,  1915,  an  officer  of  the  company  stated: 
*'We  do  not  claim  that  the  plan  eliminates  labor 
troubles,  but  we  think  it  tends  to  minimize  same.  This 
system  has  been  very  satisfactory  and  we  think  it  tends 
to  keep  our  employees  with  us  for  longer  periods  than 
would  otherwise  be  the  case.  Although  our  profit  shar- 
ing plan  has  not  accomplished  all  that  we  would  wish, 
it  has  certainly  helped  us  along  in  the  right  direction." 
An  officer  of  the  United  Textile  Workers  of  America 
expresses  the  opinion,  based  upon  inquiries  made,  that 
**the  employees  do  not  appear  to  be  carried  away  with 
the  plan,  there  being  rather  too  many  restrictions  around 
it  in  regard  to  their  working  steadily  during  the  year, 
which  is  not  always  possible  for  a  textile  worker  to 


54 

do,  having  to  lay  off  once  in  a  while  to  recuperate.  1 
cannot  say  that  the  plan  is  based  on  a  low  wage,  that  is  to 
say  lower  than  that  which  prevails  in  other  mills  for  the 
same  class  of  work,  although  it  is  needless  for  me  to  say 
that  the  whole  wage  standard  in  this  particular  branch 
of  industry  is  on  a  low  basis.  I  would  rather  believe  that 
the  employees  take  this  extra  bit  of  cash  given  to  them 
at  the  end  of  the  year  as  a  part  of  what  they  have  really 
earned  during  the  year,  but  comes  to  them  in  bulk  at  this 
particular  time." 


J.  W.  Butler  Paper  Company. 

CHICAGO,  ILL. 

All  profits  over  a  return  of  6  per  cent  on  the  capital 
stock  are  divided  among  the  employees.  The  amount 
given  each  employee  is  based  upon  his  salary,  length  of 
service,  and  expense  incurred  in  maintaining  his  depart- 
ment. Employees,  to  participate,  must  have  been  in  the 
service  at  least  one  year. 

In  1913,  $60,000  was  divided  among  250  employees. 

The  Chatfield  Milling  Company, 
jobbers  of  grain.    bay  city,  mich. 

Distributions  are  made  among  employees  varying 
according  to  the  amount  of  the  salary  received  by  them 
but  in  no  way  depending  upon  length  of  service.  The 
sum  from  which  the  distribution  is  made  is  computed 
after  deducting  all  regular  expenses  and  5%  of  the  cap- 
ital invested,  and  the  amount  upon  which  the  dividend 
is  declared  is  the  amount  of  actual  cash  invested  in  the 
business,  plus  the  total  annual  pay  roll. 

Employees  are  not  asked  to  bear  any  share  of  losses 
and  Mr.  Chatfield  reports:  "I  do  not  regard  the  plan 
a  perfect  success,  but  I  am  so  well  pleased  with  it  in  a 
general  way  that  I  intend  to  continue  it. ' ' 


55 

Eastman  Kodak  Company, 
rochester,  n.  y.    1911. 

The  company  calls  its  profit  sharing  system  a  wage- 
dividend  plan  and  bases  it  on  the  assumption  that  divi- 
dends to  common  shareholders  up  to  10  per  cent  are  the 
equivalent  of  the  employees'  fixed  wage,  and  that  cash 
dividends  in  excess  of  that  figure  may  be  fairly  con- 
sidered as  extraordinary.  The  plan  therefore  provides 
that  the  dividends  to  wage  earners  shall  be  based  upon 
such  extra  cash  dividends — that  is,  over  10  per  cent — 
paid  to  shareholders. 

In  arriving  at  the  proportion  which  shall  go  to  the 
wage-earners,  all  the  factors  bearing  upon  the  problem, 
including  length  of  service,  have  been  taken  into  consid- 
eration by  the  company  and  it  has  fixed  the  wage  divi- 
dend at  35^per^cent  of  the  extra  cash  dividends  paid  to 
the  holders  of  common  stock.  This  is  to  be  divided  and 
applied  on  a  period  of  five  years. 

To  illustrate  the  way  in  which  this  plan  works  out, 
the  years  of  1911,  1912  and  1913  may  be  taken  as  ex- 
amples. The  extra  dividends  to  holders  of  common 
stock  amounted  to  30  per  cent;  35  per  cent  of  30  per 
cent  is  lOi/o  per  cent;  this  divided  by  5  is  2.1  per  cent  on 
each  of  five  years'  wages.  Applying  this  formula,  it  will 
be  seen  that  an  employee  who  has  worked  for  the  com- 
pany five  years  and  has  averaged  $15  per  week  will 
receive  $81.90 — an  amount  equal  to  about  five  and  one- 
half  weeks'  pay.  If  he  has  worked  four  years,  he  will 
receive  $65.52,  and  so  on  down  to  one  year,  in  which 
case  he  will  receive  $16.38.  The  dividends  are  paid  on 
July  1,  following  the  year  in  which  they  were  earned. 

Only  employees  who  have  been  on  the  pay  roll  of  the 
company  for  a  full  calendar  year  are  considered,  and  con- 
tinuous service  only  is  recognized.  Piece  workers  par- 
ticipate on  the  same  basis  as  those  receiving  fixed  wages 
or  salaries. 

It  is  a  rule  of  the  company  that  no  one  who  engages 
labor  is  permitted,  in  fixing  wages,  to  take  into  account 


56 

any  wage-dividends  which  may  be  or  have  been  received 
by  the  employee. 

The  payments  to  the  employees  under  this  plan  have 
averaged  about  $500,000  a  year.  It  is  announced  that  the 
dividend  in  1916  will,  however,  mount  up  to  $1,000,000, 
and  that  about  8,000  of  the  11,000  employees  will  par- 
ticipate. This  is  on  the  basis  of  a  17i/>  per  cent  dividend 
to  employees  of  five  years'  standing,  equivalent  to  nearly 
nine  weeks'  salary.  For  employees  not  more  than  one 
year  in  the  service  the  dividend  will  be  3i/^  per  cent. 

Edison  Electric  Illuminating  Company  of  Brooklyn. 

brooklyn,  n.  y.    1910. 

To  those  employees  who  have  been  in  the  company's 
service  for  two  years,  a  percentage  of  their  salary  is 
given  each  year  equivalent  to  one-fourth  of  the  rate  of 
dividends  paid  on  the  capital  stock ;  to  those  in  the  service 
three  years,  a  percentage  equivalent  to  one-half  the  rate 
of  dividends ;  to  those  in  the  service  four  years  a  percent- 
age equivalent  to  three-fourths  of  the  rate  of  dividends; 
and  to  those  in  the  service  five  years  a  percentage  equiv- 
alent to  the  full  dividend  rate.  This  money  is  deposit- 
ed in  the  Brooklyn  Edison  Investment  Fund  to  the  credit 
of  the  employees  benefited.  The  investment  fund  is  used 
to  buy  stocks  and  bonds  of  the  Kings  County  Electric 
Light  and  Power  Company  and  the  Edison  Electric 
Illuminating  Company  of  Brooklyn. 

Dividends  are  declared  out  of  the  earnings  of  the  in- 
vestment fund  and  the  employees  participating  may  with- 
draw these  dividends  or  have  them  credited.  The  sums 
credited  to  the  employees  in  the  fund  itself,  however,  can- 
not be  withdrawn  within  three  years  except  to  make  pay- 
ments upon  the  purchase  of  a  home  or  because  of  death 
of  the  employee,  or  unusual  necessity  in  the  opinion  of 
the  committee  in  charge  of  the  fund.  Employees  who  are 
discharged  for  misconduct,  or  who  leave  the  company's 
service  without  giving  one  month's  notice,  or  who  become 


57 

insolvent,  or  who  attempt  to  sell  or  encumber  their  in- 
terest in  the  fund  without  permission,  forfeit  all  title  to 
the  sums  credited  to  them  in  the  fund. 

The  committee  in  charge  may,  at  its  discretion,  with- 
hold a  part  or  all  of  the  profit  to  which  an  employee  might 
otherwise  be  entitled. 

After  three  successive  annual  sums  have  been  credited 
to  an  employee,  he  may,  if  he  desires,  take  out  stock  in 
the  company  to  the  amount  of  his  credit  for  the  first  two 
years  of  the  three-year  period. 

Employees  may  make  regular  deposits  in  the  invest- 
ment fund,  in  addition  to  their  profit  sharing  credits,  and 
may  withdraw  such  deposits  at  will. 

At  the  close  of  1914  there  were  1,080  individual  ac- 
counts in  the  fund,  and  109  employees  owned  773  shares 
of  stock  outright.  Out  of  the  1,745  employees  of  the  com- 
pany, 1,381  had  savings  invested  in  the  fund,  and  of  these 
721  had  authorized  weekly  deductions  from  wages  as  de- 
posits in  the  fund.  The  sum  of  $256,819.74  had  been  de- 
posited in  the  fund  through  profit  sharing,  $370,379.37 
through  deposits  of  employees,  and  $41,450.12  through 
dividends  earned. 

The  company  considers  the  plan  to  have  been  a  suc- 
cess. 

Empire  Trust  Company, 
new  york  city. 

A  certain  percentage  of  net  profits  of  the  company, 
which  percentage  rises  with  an  increase  of  profits  of  the 
company  upon  a  fixed  ratio,  is  divided  among  the  em- 
ployees yearly  upon  the  basis  of  salary  received,  length 
of  service  and  special  merit,  as  measured  by  standards 
fixed  from  time  to  time  by  the  officers. 

The  company  reports:  ''The  plan  is  well  received 
and  we  believe  tends  directly  to  promote  efficiency  and 
stimulate  endeavor." 


58 

Farr  Alpaca  Company. 

manufacturers  of  pure  alpaca  and  mohair  lustres. 

holyoke,  mass.    1914. 

Employees  who  render  satisfactory  and  continuous 
service  for  twelve  months  receive  a  dividend  on  their 
year's  wages  at  the  same  rate  that  is  paid  shareholders 
on  their  stock.  This,  at  present,  is  8%.  The  com- 
pany has  3,000  employees  and  the  annual  wage  roll  is 
about  $1,800,000.  The  amount  forfeited  by  the  discharge 
of  an  employee,  or  by  his  leaving  voluntarily,  or  by  his 
exclusion  on  account  of  unsatisfactory  service,  is  credited 
to  a  benefit  fund  out  of  which  the  directors  of  the  com- 
pany may  grant  assistance  to  aged  or  disabled  employees. 

In  its  announcement  to  employees,  the  company  says : 
'*This  system  of  profit  sharing  is  not  offered  as  a  sub- 
stitute for  normal  advances  in  wages  when  conditions 
warrant."  In  January  1915,  after  the  plan  had  been 
in  operation  one  year,  a  committee  of  employees  pre- 
sented a  testimonial  to  the  meeting  of  stockholders,  ex- 
pressive of  their  appreciation  of  the  plan  and  its  admin- 
istration. In  January,  1916,  the  directors  voted  to  con- 
tinue the  plan  another  two  years. 

General  Asphalt  Company, 
camden,  n.  j.    191g. 

This  company  has  announced  a  profit  sharing  and 
pension  plan  for  employees  of  the  company  and  its 
subsidiaries. 

The  profit-sharing  distribution  will  be  made  to  all 
officers  and  employees  receiving  a  salary  of  $60  or  more 
a  month,  and  who  shall  have  been  continuously  in  the 
company's  employ  for  one  year  or  more  prior  to  the 
expiration  of  the  fiscal  year  ending  January  31, 1917.  The 
rate  of  distribution  will  be  1%  of  the  salary  of  each 
employee  for  each  $100,000  of  net  gain  to  surplus  in  the 
fiscal  year  ending  January  31,  1917,  over  and  above  the 
amount  required  for  the  5%  dividend  on  the  preferred 
stock. 


59 

General  Ice  Delivery  Company, 
detroit,  mich.    1909. 

Five  per  cent  of  the  annual  net  earnings  of  the  com- 
pany is  distributed  among  the  employees  who  have  been 
with  the  company  long  enough  to  have  earned  a  promo- 
tion. 

In  July,  1915,  the  president  of  the  company,  said: 

'*Our  profit-sharing  plan — 5%  of  the  profits 
every  year — ensures  the  receipt  of  something  by  our 
men  if  there  are  dividends.  It  therefore  has  a  per- 
manency which  some  other  plans  do  not  possess.  The 
only  shortcoming  is  the  fact  that  some  men  receive 
profits  who  really  are  not  worthy,  but  the  men  in  our 
organization  soon  find  that  out  and  it  has  a  wholesome 
effect  upon  those  who  are  not  really  entitled  to  considera- 
tion." 

The  total  annual  distribution,  exclusive  of  commis- 
sions to  wagon  men,  has  increased  from  about  $2,000  to 
$7,500.  The  company  regards  the  plan  as  ''a  complete 
success  and  of  a  very  permanent  nature." 


/ 


Hollenberg  Music  Company, 
little  rock,  ark. 

All  employees  receive  at  Christmas  time  the  same 
profit  upon  their  yearly  salary  as  is  the  percentage  of 
profit  on  the  capital  and  surplus  of  the  company. 

The  first  year  the  employees  receive  50%  of  the 
amount  due  them  in  cash  and  the  remaining  50%  the 
company  keeps  until  the  following  year.  The  second 
year  continues  in  the  same  way,  retaining  half  that  is 
due.  This  the  company  states  is  "to  insure  continuance 
of  employees." 

If  an  employee  resigns  or  is  discharged  for  any  pur- 
pose whatsoever,  his  interest  in  the  profit  participating 
plan  ceases. 

The  company  was  forced  to  pass  the  dividend  in  1914. 
In  preceding  years  it  reached  as  high  as  111/2%. 


60 

Houghton    Mifflin  Company, 
boston,  mass.    1872. 

The  company  maintains  a  Savings  Department,  for 
the  benefit  of  the  employees,  in  which  deposits  can  be 
made  at  any  time  in  any  sum  up  to  $1,000.  Whenever  on 
the  first  of  January  of  any  year  the  deposits  of  any  de- 
positor equal  or  exceed  $100  and  remain  one  year  there- 
after, the  company  agrees  to  pay  to  such  depositor  a  por- 
tion of  the  annual  profits  not  exceeding  4%  additional  on 
each  $100. 

The  number  of  depositors  averages  from  one-third 
to  one-half  of  the  company's  1,000  employees.  The  com- 
pany reports  that  the  system  has  worked  well  for  all 
purposes,  has  bred  habits  of  care  and  economy  and  cre- 
ated a  cordial  feeling  between  it  and  the  employees.  This 
is  one  of  the  oldest  profit-sharing  plans  in  the  United 
States. 

The  Hub. 
clothing  house.    chicago,  ill.    1891. 

A  percentage  of  the  profits  is  distributed  among  em- 
ployees who  have  been  with  the  company  two  years  or 
more,  the  rate  increasing  with  each  year  of  employment 
and  the  amounts  ranging  from  $15.  to  $500.  The  store 
employs  about  700  people. 

The  Kaynee  Company. 

boys'  and  youths'  shirts,  children's  wash  dresses, 
cleveland,  ohio.   1915. 

The  executives  and  the  heads  of  some  of  the  depart- 
ments receive  a  distribution  based  on  the  quality  and 
length  of  service  rendered. 

Employees  included  in  the  plan  receive  from  the  com- 
pany certificates  entitling  them  to  an  amount  equal  to  a 
dividend  on  a  certain  number  of  shares  of  common  stock, 
the  number  of  shares  being  stated  in  the  certificate.  The 
rights  under  the  certificate  are  purely  personal  and  not 
transferable. 


61 

The  company  has  between  500  and  600  employees  and 
less  than  25  participated  in  the  1915  distribution.  The 
company  states:  "Our  problem  arises  from  the  fact  that 
90  per  cent  of  our  employees  are  women  whose  average 
length  of  employment  is  from  two  to  three  years.  It  is 
the  constant  shifting  in  and  out  that  makes  most  of  the 
plans  we  have  heard  of  inoperative. ' ' 

The  Keystone  Driller  Company, 
beaver  falls,  pa.    1906. 

This  plan  has  also  savings  and  stock  subscription 
features. 

Employees  may  deposit  on  pay  day  any  amounts  they 
desire,  which  immediately  begin  to  draw  interest.  After 
the  expiration  of  six  months,  if  the  owners  so  desire,  the 
deposits  become  profit-sharing  accounts  upon  an  equality 
with  invested  capital.  The  company,  however,  guaran- 
tees that  the  profit  shall  never  be  less  than  6  per  cent. 
Deposits  may  be  withdrawn  on  any  regular  pay  day. 

Profit-sharing  certificates  amounting  to  $50  or  over 
may  at  any  time  be  exchanged  for  regular  corporation 
stock  at  par. 

Employees  cannot  hold  profit-sharing  certificates  in 
excess  of  $1,000 ;  but  if,  having  reached  this  amount,  the 
certificates  are  exchanged  for  corporation  stock,  the  em- 
ployees begin  deposits  anew.  Ownership  of  profit-shar- 
ing certificates  of  $50  or  over  entitles  the  owner  to  pref- 
erence of  employment  as  vacancies  may  occur,  but  "in 
case  the  owner  joins  in  any  hostile  strike  against  the 
company,  profit  sharing  or  interest,  as  the  case  may  be, 
shall  immediately  and  permar.ently  cease." 

The  company  reports  that  the  plan  has  established  a 
community  of  interest,  raised  the  efficiency  of  the  work- 
men, eliminated  floaters  and  reduced  strikes. 

KuTZTowN  Foundry  and  Machine  Company. 

PHILADELPHIA,  PA.     1914. 

A  part  of  the  net  profits  is  distributed  among  the  em- 


62 

ployees  in  proportion  to  their  salaries  or  wages,  the  total 
amount  being  determined  by  the  executive  commitiee 
after  a  dividend  has  been  declared  of  not  more  than  8 
per  cent  on  the  capital  stock. 

Payments  are  made  quarterly  to  employees  who  re- 
main in  the  service  continuously  during  that  quarter,  but 
those  dismissed  for  lack  of  work  are  allowed  their  pro- 
portionate share  on  whatever  wages  they   have   earned. 

Employees  receive  their  profits  through  their  depart- 
ments and  the  allotment  of  a  department  is  reduced  by 
the  amount  of  any  expense  incurred  by  the  company  to 
replace  defective  workmanship  and  materials  caused  by 
the  carelessness  of  the  employees  in  the  department. 

MiLMORE   CORPOKATION. 
MANUFACTURING  CHEMISTS.     SOUTH  BEND,  IND.     1915. 

Whenever  a  dividend  is  paid  to  stockholders,  a  sum 
equal  to  the  dividend  is  credited  to  an  employees'  special 
account,  out  of  which  account  employees  are  to  be  paid 
an  annual  bonus  equal  to  6  per  cent  of  their  yearly  wages. 
An  additional  one-half  of  1  per  cent  of  their  wages  is 
paid  for  each  year  of  the  first  five  years  of  service,  1  per 
cent  for  each  year  of  the  second  five  years  of  service  and 
so  on.  No  employee  participates  who  has  not  been  in 
the  employ  of  the  company  for  three  consecutive  years. 

The  resolution  of  the  board  of  directors  by  which  the 
plan  was  adopted  described  it  as  a  unique  profit-sharing 
plan  and  states  "that  the  relative  value  of  a  stockholder 
and  employee  shall  be  considered  equal  and  each  and 
every  dollar  earned  by  the  corporation  and  passed  to 
surplus  account  shall  be  held  for  the  joint  account  of  both 
the  stockholders  and  employees." 

The  plan  does  not  bear  out  this  statement. 

The  National  Bank  of  Commerce  in  St.  Louis, 
st.  louis.  mo.    1900. 

At  the  end  of  each  year  the  net  earnings  of  the  bank 
are  ascertained  and  after  deducting  losses  and  a  sum 


63 

equal  to  6  per  cent  of  the  capital,  surplus  and  undivided 
profits,  6  per  cent  of  the  remaining  net  profits  is  set  aside 
for  an  employees'  pension  fund,  and  4  per  cent  for  an 
employees'  participation  fund.  The  participation  fund 
is  distributed  in  cash  at  the  end  of  each  year  among  the 
officers  and  employees  in  proportion  to  their  salaries. 
The  board  of  directors  reserves  the  right  at  any  time  to 
discontinue  the  appropriations. 

NoERiTON  Woolen  Mills. 

(J.   MORTON   BROWN   &   CO.,   PROPRIETORS)    NORRISTOWN, 

PA.,  1887. 

Percentage  of  profits,  according  to  length  of  service, 
by  agreement.  Company  enthusiastic  at  the  time  of 
publication  by  N.  P.  Gilman  (1889). 

The  Outlook  Company, 
new  york  city.    1901. 

When  the  profits  on  the  company's  business  have  been 
determined  at  the  end  of  the  fiscal  year,  a  certain  per- 
centage is  paid  to  employees, — the  distribution  being 
based  on  a  certain  percentage  of  each  individual's  wage 
or  salary.  The  average  number  participating  has  been 
about  sixty,  in  a  total  average  force  of  about  seventy. 

The  company  reports:  "We  believe  that  this  plan 
has  proved  a  success  in  every  way.  It  is  greatly  appre- 
ciated by  all  our  employees,  and  we  believe  has  increased 
their  individual  loyalty  and  efficiency." 

Peninsular  Paper  Company. 

YPSILANTI,  MICH.     1914. 

The  employees  are  eligible  who  have  been  with  the 
company  for  one  year  and  whose  services  are  satisfactory. 
These  employees  receive  a  wage  dividend  on  the  actual 
year's  wages,  reckoned  at  the  same  percentage  as  the 
shareholders  of  the  company  receive  in  dividends  on  their 
stock. 


64 

Employees  who  are  discharged  or  whose  services  are 
unsatisfactory  lose  all  claim  to  share  in  the  profits,  and 
the  amount  which  is  thus  forfeited  to  the  company  is 
credited  to  a  benefit  fund  for  aged  and  disabled  em- 
ployees. The  company  states  that  the  object  of  the  plan 
is  to  lead  the  employees  "to  exercise  the  greatest  possible 
care  to  guard  against  poor  work  and  waste  of  time  and 
material.'* 

Record  Auto  Supply  and  Service  Company, 
washington,  d.  c.    1916. 

Ten  per  cent  of  the  net  profits  of  the  company  will 
be  divided  in  cash  among  the  employees  in  proportion 
to  the  average  wages  earned  during  any  given  profit 
sharing  period.  All  employees,  including  heads  of  de- 
partments, are  entitled  to  participate.  The  company 
states : 

"This  plan  has  been  put  in  operation  since  the 
first  of  this  year,  and  succeeded  a  plan  under  which 
commissions  were  paid  to  the  men  on  all  productive 
work  done  by  them  above  a  certain  amount  per  week. 
We  believe  that  the  plan  which  we  are  now  follow- 
ing will  give  better  results  from  an  employee's  stand- 
point as  well  as  the  employer's.  In  the  case  of  the 
employee's  standpoint  it  stimulates  him  to  do  better 
work  and  thereby  increase  in  salary  for  the  larger 
his  salary  the  greater  the  extent  to  which  he  will 
participate  in  the  distribution  of  this  ten  per  cent 
net  earnings  of  the  company.  From  the  employer's 
standpoint  it  means  that  the  help  will  become  more 
efficient  and  give  better  service  to  the  patrons  of  the 
concern." 

In  practice  each  employee  is  entitled  to  one  point  for 
each  dollar  of  his  weekly  salary.  Thus  an  employee 
earning  $20  a  week  is  entitled  to  20  points,  while  one 
earning  $25  is  credited  with  25  points.  Should  an  em- 
ployee's salary  be  advanced  during  the  profit-sharing 
period,  an  average  of  his  weekly  rate  during  the  profit- 
sharing  period  is  taken  and  the  average  weekly  salary  in 


65 

dollars  determines  the  number  of  profit-sharing  points 
credited  to  him. 

R.  F.  Simmons  Company.  j 

MANUFACTURING   JEWELERS.     ATTLEBORO,   MASS.      1902. 

The  employees  who  have  rendered  faithful  service 
for  at  least  three  consecutive  months  are  permitted  to 
participate  in  the  profit-sharing  fund,  which  is  deter- 
mined as  follows: 

Not  less  than  8  per  cent  nor  more  than  12  per  cent 
of  the  dividend  paid  the  stockholders  is  divided  by  the 
total  amount  of  wages  paid  all  employees.  The  per- 
centage thus  obtained  constitutes  the  rate  of  dividend 
to  the  employee  upon  his  salary  for  the  year.  Em- 
ployees desiring  to  participate  are  required  to  sign  a 
card  agreeing,  among  other  things,  "to  be  on  the  pay  roll 
three  consecutive  months  and  not  to  leave  our  employ 
voluntarily,  or  to  be  discharged  for  incompetency,  or 
disobedience  of  orders." 

The  company  reports  that  there  has  been  produced 
a  greater  spirit  of  co-operation  between  the  employer 
and  the  employee  but  that  from  the  nature  of  their  busi- 
ness they  have  been  able  to  make  no  tangible  estimate 
of  the  increased  profits.  With  the  adoption  of  the  plan 
the  Christmas  distribution  of  the  two  previous  years 
was  discontinued. 

Simplex  Wire  Cable  Company, 
boston,  mass.    1901. 

A  definite  percentage  of  each  year's  profits  is  divided 
among  employees  who  have  been  with  the  company  at 
least  one  year  and  whose  services  are  satisfactory.  This 
percentage  is  fixed  in  advance  but  is  not  publicl}^  an- 
nounced, for  reasons  of  general  business  policy.  The 
eligible  employees  share  in  proportion  to  their  wages 
earned  during  the  year,  but  not  more  than  20  per  cent 
will  be  paid  under  any  circumstances.  Since  the  divi- 
dends are  not  payable  until  March  of  the  year  following 


66 

that  in  which  they  are  earned,  the  employee  must  have 
been  in  the  service  26  months  before  receiving  his  first 
actual  payment. 

The  dividends  paid  have  ranged  from  7  to  18Vo  per 
cent  on  the  wages  earned.  The  employees  number  about 
550,  a  large  proportion  of  whom  are  not  in  the  company's 
employ  a  sufficient  length  of  time  to  share  in  the  profit 
distribution. 

The  president  of  the  company  states  that  the  payment 
of  the  dividends  in  a  lump  sum  annually  has  the  effect 
in  most  cases  of  inducing  employees  to  save  or  to  invest 
the  money  in  permanent  home  improvements.  As  to  the 
general  results  of  the  plan,  he  says : 

**Our  profit  sharing  was  started  not  as  a  charity 
but  as  a  business  move,  and  after  twelve  years'  ex- 
perience we  are  convinced  that  it  has  contributed 
to  our  financial  welfare  as  well  as  to  our  satisfaction 
in  the  conduct  of  the  business." 

The  Spencer  Wiee  Company, 
iron  and  steel  wire.    worcester,  mass.    1915. 

This  plan  is  identical  with  that  of  the  Farr  Alpaca 
Company  excepting  the  rate  of  dividends  paid, 
which  at  present  is  6  per  cent.  All  of  the  company's  750 
employees  are  affected.  In  its  announcement  to  the 
employees  of  the  adoption  of  the  plan,  the  company  states 
that  it  is  intended  to  encourage  increased  production  and 
avoid  frequent  changes  in  the  force ;  and  that  it  is  hoped 
the  profits  will  be  increased  by  the  employees  taking  a 
personal  interest  in  the  continued  success  of  the  busi- 
ness. 

Stambaugh-Thompson  Company, 
wholesale  hardware  dealers.    youngstown,  ohio. 

1913. 

Out  of  the  net  profits  remaining  at  the  end  of  the 
fiscal  year  there  are  first  deducted  fixed  amounts  repre- 
senting a  fair  return  on  the  capital  invested  in  the  busi- 


67 

ness.  One-half  of  the  balance  remaining  after  such  de- 
duction is  distributed  in  cash  among  all  the  employees  in 
proportion  to  their  wages  as  shown  by  the  pay  roll. 
About  100  employees  participate. 

The  term  "profits"  as  used  by  the  Board  of  Directors 
in  establishing  the  system,  means  ''all  profits  which  the 
employees,  by  their  services,  help  to  create,  but  does  not 
include  profits  which  accrue  without  any  effort  on  their 
part,  such  as  profits  on  the  sale  of  real  estate,  stocks  or 
bonds  owned  by  the  company,  whether  of  this  or  other 
corporations,  nor  does  it  include  rent  from  lands  or  build- 
ings owned  but  not  used  by  the  company  in  its  business." 

The  company  states  that  it  considers  the  plan  a  suc- 
cess. 

.  f' ',. 

Bernpiard  Stern  &  Sons. 
flour  millers.    milwaukee,  wis.    1914. 

At  the  end  of  the  fiscal  year,  on  Sept.  1,  a  certain 
definite  percentage  of  the  net  profits  is  placed  to  the 
credit  of  a  fund  known  as  the  Employees'  Profit  Sharing 
Fund. 

On  Nov.  1,  all  employees  who  have  been  in  the  firm's 
employ  one  year  (except  those  in  the  selling  department) 
participate  in  such  proportion  as  each  employee's  wages 
or  salary  for  the  preceding  year  shall  bear  to  the  entire 
amount  paid  for  wages  and  salaries  during  that  period 
to  such  employees.  Of  the  '^^  employees  of  the  firm, 
about  65  participate. 

The  firm  considers  the  plan  a  success.  In  announc- 
ins:  it  to  their  employees,  the  objects  were  explained  as 
follows : 

''The  purpose  of  the  Emplovees'  Profit  Sharing 
Fund  is  not  alone  to  enable  each  emplovee  to  share 
in  a  proportion  of  the  net  profits  earned  by  the  firm, 
but  also  to  be  an  additional  incentive  for  each  em- 
plovee to  give  the  maximum  of  service  to  the  firm. 
Each  and  everv  emplovee,  no  matter  what  his  duties 
may  be,  can,  through  his  own  effort,  aid  and  assist 


68 

in  a  greater  return  of  net  profits  to  the  firm,  and  it 
is  hoped  that  each  employee  will  keep  this  constantly 
in  mind,  and  endeavor  to  co-operate  with  the  heads 
of  departments  and  the  members  of  the  firm,  in  real- 
izing the  largest  return  possible  in  our  mutual 
endeavor." 


Studebaker  Corporation, 
south  bend,  ind.    1913. 

The  employees  who  share  in  the  profits  include  only 
executive  officers,  important  clerks  and  foremen.  These 
are  divided  into  four  groups,  the  more  important  of  the 
employees  receiving  a  greater  percentage. 

The  profit  sharing  fund  is  estimated  as  follows : 

Out  of  the  net  profits  7  per  cent  is  paid  upon  the  Pre- 
ferred Stock;  5  per  cent  upon  the  Common  Stock,  and  a 
certain  sum  is  set  aside  for  the  special  surplus  account 
for  the  amortization  of  the  Preferred  Stock.  Then  12 
per  cent  of  the  balance  of  the  profits  remaining  up  to 
$1,000,000;  14  per  cent  of  such  balance  in  excess  of 
$1,000,000  and  up  to  $2,000,000,  and  15  per  cent  of  such 
excess  over  $2,000,000  constitute  the  profit  sharing  fund. 
Payments  to  the  first  three  classes  are  made  in  50  per 
cent  Common  Stock  and  50  per  cent  cash,  while  payments 
to  the  fourth  class,  which  includes  the  foremen,  chief 
clerks,  etc.,  are  made  in  cash  only. 

The  stock  is  delivered  in  instalments,  25  per  cent  after 
the  first  year,  25  per  cent  after  the  second  year  and  50 
per  cent  after  the  third  year.  Any  dividends  accruing 
are  promptly  paid  the  participants.  Employees  who  re- 
sign during  the  year  lose  all  right  to  share  in  the  profits 
of  that  year,  and  forfeit  to  the  company  20  per  cent  of 
the  Common  stock  held  for  their  account  from  the  bonus 
of  the  previous  year. 

The  company  reports  '^We  find  it  very  satisfactory." 


69 

I  The  W.  S.  Tyler  Company. 

MANUFACTURERS   OF  WIRE   CLOTH   AND  MINING   SCREEN. 
CLEVELAND,  OHIO.     1915. 

After  6  per  cent  has  been  paid  on  the  capital  stock, 
all  cash  dividends  are  divided  between  the  stockholders 
and  employees  as  follows: 

(1)  Employees  in  the  service  of  the  company  for  three 
years  or  more  receive  same  percentage  as  do  stockhold- 
ers. 

(2)  Employees  in  the  service  for  two  years  but  less 
than  three  years,  two-thirds  of  the  rate  of  cash  dividends. 

(3)  Employees  in  the  service  for  six  months  but  less 
than  two  years,  one-third  of  the  rate  of  cash  dividends. 

Dividends  apply  to  all  employees  and  are  based  on  the 
total  amount  of  wages  paid  to  each  employee.  Em- 
ployees discharged,  or  leaving  the  company's  service 
voluntarily,  forfeit  their  right  to  share  in  any  dividends, 
but  those  laid  off  for  lack  of  work  share  in  proportion 
to  the  wages  they  have  actually  earned. 

Union  Savings  Bank  and  Trust  Company, 
cincinnati,  ohio. 

A  certain  percentage  of  the  company's  profits  above 
6fo  on  the  capital  stock  is  set  aside  for  distribution  among 
the  employees  who  have  been  in  the  company's  service 
three  years  or  more. 

The  company  retains  charge  of  the  accumulation  of 
this  fund,  allowing  a  liberal  rate  of  interest,  and  permits 
an  employee  to  withdraw  his  portion  only  when  he  de- 
sires to  leave  the  company's  service,  or  when  the  amount 
withdrawn  is  to  be  used  for  investment  in  a  home  or  in 
some  security  approved  by  the  company.  Such  securities 
are  kept  in  its  custody. 

The  company  at  first  made  this  profit  sharing  distri- 
bution directly  to  its  employees  but  found  this  to  be  a 
failure  and  resorted  to  the  plan  now  in  use.  It  is  the  be- 
lief of  the  management  ''that  each  of  our  employees  re- 
ceives fully  the  same  regular  salary  that  our  competitors 


70 

would  give  liim"  and  that  ''he  gives  us  better  service  than 
he  would  our  competitor,  as  an  automatic  result  of  our 
profit  sharing  plan."  The  average  distribution  per  year 
is  estimated  at  between  $300  and  $400  per  employee. 

United  Electkic  Light  &  Wateb  Company, 
hartford,  conn.    1916. 

Announcement  of  a  ''Salary  Dividend  and  Welfare 
Plan"  to  be  maintained  by  this  company  was  reported  on 
February  29.  It  is  stated  that  5  per  cent  of  the  net  in- 
come of  the  company,  before  payment  of  dividends,  will 
be  set  aside  quarterly  for  the  purposes  of  this  plan,  and 
that  the  distribution  will  apply  to  all  employees  who  have 
been  with  the  company  one  year  or  more. 

The  eligible  employees  are  grouped  according  to 
length  of  service — Class  "A"  including  all  who  have 
been  with  the  company  two  years  or  more,  and  Class 
"B",  those  employed  from  one  to  two  years. 

One-half  the  amount  set  aside  for  the  salary  dividends 
will  be  distributed  quarterly  in  proportion  to  the  wages 
of  the  recipients  for  the  three  months,  and  the  other  half 
is  held  in  a  "welfare  fund"  for  the  benefit  of  the  em- 
ployees. It  is  understood  that  whenever  the  welfare  fund 
reaches  a  certain  amount,  the  income  from  the  investment 
will  be  distributed  pro  rata  among  the  eligible  employees, 
and  that  those  who  leave  the  company's  service  with  good 
records  will  be  paid  their  proportionate  share  in  this  ac- 
cumulated fund.  Employees  in  temporary  financial  need 
may  borrow  from  this  welfare  fund,  which  is  maintained 
by  a  board  of  trustees  at  the  expense  of  the  company. 

The  Ward  Baking  Company. 

NEW  YORK  CITY.     1913. 

After  the  payment  of  regular  dividends  to  stock- 
holders, 6%  of  the  net  profits  is  set  apart  for  the  Em- 
ployees' Profit  Sharing  Fund. 

All  employees  who  have  been  with  the  company  one 
full  year  and  who  are  members  of  the  Ward  Baking  Com- 


71 

pany  Beneficial  Association  (except  directors,  officers  and 
managers  of  bakeries)  are  eligible  to  participate  in  the 
fund.  The  interest  of  each  participating  employee  bears 
the  same  proportion  to  the  entire  fund  as  his  salary  at 
the  time  when  the  fund  for  that  year  is  created  bears  to 
the  aggregate  salaries  of  all  the  employees. 

When  conditions  warrant,  10%  is  added  to  the  share 
of  each  employee  for  each  additional  year's  service  with 
the  company. 

The  dividends  to  employees  are  paid  in  cash  but  they 
**are  invited  to  invest  their  dividend,  together  with  any 
other  savings  which  they  may  have  accumulated,  in  the 
stock  of  the  company,"  and  to  those  who  elect  to  do  this 
favorable  terms  of  investment  are  offered. 

After  two  years '  trial,  the  plan  has  worked  out  so  that 
the  share  of  profits  received  by  employees  equals  2% 
of  their  annual  wages.  More  than  80%  of  the  employees 
are  members  of  the  Beneficial  Association,  and  eligible  to 
share  in  the  profits. 

Wayne  Knitting  Mills, 
manufacturers  of  hosiery.   fort  wayne.  ind.   1904. 

The  company  organized  a  ''Textile  Industrial  Club" 
composed  of  heads  of  departments  and  certain  officials 
with  a  membership  of  about  fifty.  A  fixed  percentage  of 
the  company's  profits  over  and  above  the  regular  divi- 
dends was  set  aside  as  a  club  fund  and  a  portion  of  this 
was  used  to  build  a  clubhouse.  From  this  fund  also,  pay- 
ments in  the  nature  of  profit  sharing  are  made  to  the 
members  on  a  percentage  basis,  and  small  bonuses  of 
from  $5  to  $50  are  distributed  among  several  hundred 
other  employees,  not  piece  workers,  at  the  end  of  the  year, 
as  a  matter  of  good  will. 

Social  affairs  of  the  textile  club  are  managed  by  com- 
mittees chosen  by  the  members,  while  matters  of  a  busi- 
ness nature  are  handled  by  the  company.  A  member  who 
fails  to  attend  three  consecutive  meetings  of  the  club. 


72 

without  excuse  is  expelled  and  ceases  to    share   in   the 
profits. 

SPECIAL  DISTRIBUTIONS. 

Forms  of  voluntary  special  distribution  are  very  nu- 
merous. They  are  of  interest  mainly  as  reflecting  the  at- 
titude of  a  large  number  of  employers.  In  many  cases 
there  is  a  genuine  desire  to  do  something  more  than  the 
wage-scale  requires;  in  others,  there  may  be,  and  no 
doubt  sometimes  is,  the  ulterior  motive  of  heading  off  de- 
mands from  the  employees.  These  gratuities  cover  a 
wide  range,  from  the  petty  to  the  substantial,  such  as  the 
following: 

Outright  cash  payments  at  the  end  of  the  year,  de- 
termined arbitrarily  by  the  employer  at  the  time. 

Relief  funds  maintained  wholly  or  in  part  by  the 
employer,  including  sickness,  accident,  death  and 
pension  allowances. 

Liberal  interest  allowed  to  employees  on  savings 
deposited  with  the  company. 

Meritorious  rewards  for  prompt  attendance  or 
efficient  work,  or  for  refraining  from  use  of  tobacco 
or  liquor. 

Premiums  on  life  insurance  policies  paid  by  firm, 
based  on  term  of  service  or  efficiency. 

Plan  for  lending  to  employees  without  interest  or 
at  nominal  rate. 

Discounts  on  household  goods  or  necessities  sold 
to  employees. 

Christmas  or  Thanksgiving  remembrances. 

Prizes  for  suggestions  and  gardens. 

Free  transportation  for  employees  on  steam  and 
electric  railroads. 

Lunches  supplied  to  employees  free  of  charge  or 
at  nominal  prices. 


The  following  are  typical  plans  under  this  classifi- 
cation : 


73 

L.  &  S.  Adler. 

MANUFACTURERS   OF  RAINCOATS   AND  OVERCOATS. 
BALTIMORE,  MD.     1914. 

Payments  are  made  to  the  employees  in  all  ranks 
based  upon  integrity  and  conscientiousness  of  work,  effi- 
ciency, length  of  service  and  individual  effort  to  elimin- 
ate waste. 

Amount  distributed  depends  each  year  upon  the  to- 
tal profits  earned. 

The  Alexander  Hamilton  Institute, 
new  york  city. 

All  employees  who  have  been  in  the  service  of  the 
Institute  one  year  or  more  are  given  a  bonus  of  5  per 
cent  on  their  annual  salaries.  The  distribution  is  made 
at  the  holiday  season. 

American  Steel  Package  Company. 

manufacturers  of  steel  barrels  and  cases, 
defiance,  ohio.   1914. 

Each  employee  gets  a  bonus  computed  at  21/2  per 
cent  per  hour  for  every  hour  he  has  worked  continu- 
ously since  the  plan  was  put  in  operation.  Deductions 
are  made  for  lateness.  Cash  distribution  is  also  made 
to  foremen  and  office  help.  At  the  end  of  the  first  six 
months  211  men  received  a  bonus,  102  of  whom  were 
paid  from  $30  to  $35. 

Anchor  Post  Iron  Works, 
garwood,  n.  j.    1911. 

(Statement   by   the   President,   H.    G.    Thomson.     New 

York,  Feb.  29,  1916.) 

We  are  a  manufacturing  corporation,  our  factory  be- 
ing at  Garwood,  New  Jersey,  and  in  addition  to  our  shop 
men,  we  employ  an  equal  or  larger  force  of  workmen  out- 
side the  factory  for  the  setting  up  of  our  fences,  railings 
and  gates,  150  in  all. 


74 

The  company  has  had  for  a  number  of  years  a  profit- 
sharing  arrangement,  only  including,  however,  about  a 
half  dozen  of  the  chief  executives  or  department  heads, 
and  three  of  our  branch  managers  in  Boston,  Hartford 
and  Philadelphia. 

Our  profit-sharing  plan  is  for  cash  distribution  at  the 
end  of  each  year,  based  on  salary  and  the  net  profits  of 
the  joreceding  year. 

We  regard  it  as  successful  as  far  as  it  goes.  We  are 
inclined  to  think,  however,  that  it  is  too  narrow  in  its 
scope  and  should  be  modified  so  as  to  include  more  indi- 
viduals than  now  participate. 

I  have  always  been  of  the  opinion  that  profit-sharing 
which  included  workmen  and  mechanics,  either  inside 
the  factory  or  outside,  was  not  a  very  satisfactory  ar- 
rangement from  the  employer's  point  of  view;  that  the 
real  way  of  paying  extra  wages,  if  that  is  desirable, 
should  be  in  the  shape  of  a  bonus  on  work  actually  per- 
formed over  and  above  the  average  daily  output,  pro- 
vided that  can  be  easily  and  quickly  computed;  that  the 
deferred  profit-sharing,  as  far  as  workmen  are  concern- 
ed, is  very  likely  to  create  a  feeling  of  discontent  when- 
ever the  profits,  as  they  sometimes  do,  fall  below  those 
of  previous  years. 

We  do  feel,  however,  that  something  of  advantage 
could  be  worked  out  to  include  practically  all  of  our  of- 
fice force  and  factory  heads,  who  are,  of  course,  in  very 
much  closer  touch  with  the  trend  of  the  business  from 
month  to  month,  and  are,  we  think,  of  unusually  high 
order  and  intelligence,  loyalty  and  faithfulness  to  the 
interests  of  the  firm. 

We  have  a  committee  of  our  board  of  directors  inves- 
tigating this  whole  question.  The  question  is  so  compli- 
cated and  has  so  many  pros  and  cons  that  I  am  very 
much  in  doubt  at  the  present  time  as  to  what  method,  if 
any,  would  be  desirable. 

As  I  look  at  the  matter,  if  profit  sharing  is  desirable 
at  all,  it  should  not  be  on  a  fixed  percentage  for  all  based 


75 

on  the  amount  of  salary  each  is  receiving,  but  that 
rather  there  should  be  two,  three  or  four  classes  of  em- 
ployees each  receiving  a  different  rate  of  bonus.  In  other 
words,  the  executive  or  department  heads,  who  are  in  a 
large  measure  responsible  for  the  success  of  the  busi- 
ness, should  be  in  a  group  by  themselves  as  we  now  have 
it,  and  should  receive  a  larger  degree  of  bonus  than  the 
others.  If  this  group  of  employees  is  the  right  one,  an 
office  boy,  for  example,  would  be  in  the  lowest  class.  If 
by  energy  and  intelligence  he  was  promoted  to  be  a  sales- 
man, lie  would  then  step  up  into  a  higher  class,  where 
the  year's  division  of  profits  would  be  more  attractive. 
If  from  that,  he  became  a  sales  manager  or  head  of  a 
branch  office,  he  would  be  promoted  in  a  still  higher  class, 
and  finally  if  he  became  a  director  of  the  company,  he 
would  be  in  the  highest  class  of  all. 

The  stock  in  our  company  is  only  held  in  the  hands 
of  a  few  individuals,  and  we  have  never  had  any  general 
distribution  of  it,  although  we  might  do  that  at  some  later 
day.  I  do  not  believe  in  a  concern  selling  its  stock  to  its 
employees,  unless  possibly  it  be  a  company  like  the 
United  States  Steel,  where  the  stock  is  largely  in  the 
hands  of  the  public,  is  traded  in  from  day  to  day  and  has 
a  definite  value  from  day  to  day. 

Atherton  Furnituee  Company, 
brockton,  mass.    1914. 

Beginning  with  the  year  1914,  the  company  gave  each 
employee  who  had  been  in  its  employ  for  one  year  or  more 
a  cash  bonus  of  2  per  cent  of  his  yearly  salary. 

The  company  continued  the  plan  for  the  year  1915. 

Atlas  Powder  Company, 
explosives.    wilmington,  dela.    1913. 

Employees  who  have  been  in  the  service  of  the  com- 
pany at  least  two  years  who  contribute  in  an  unusual 
degree  to  the  welfare  of  the  company  by  their  inventions, 
ability,  industry  or  loyalty,  and  whom,  in  the  opinion  of 


76 

the  directors,  it  is  desirable  to  have  interested  in  the  busi- 
ness as  stockholders,  are  granted  a  bonus  consisting  of 
stock  of  the  company,  the  amount  of  which  is  determined 
by  the  directors  and  shall  not  in  any  one  year  be  greater 
than  one-half  of  the  annual  salary  of  the  employee  to 
whom  the  award  is  made.  The  certificate  for  the  num- 
ber of  shares  thus  allotted  is  not  delivered  to  the 
employee  but  is  held  by  the  bonus  trustee  together  with 
a  power  of  attorney  transferring  the  employee's  interest 
in  the  stock  of  the  company.  The  certificate  and  power 
of  attorney  are  held  for  six  years,  at  the  expiration  of 
which  time  the  stock  is  delivered  to  the  employee  and  the 
power  of  attorney  cancelled.  If  the  employee  leaves  or 
is  dismissed  from  the  service  of  the  company,  he  is  en- 
titled to  receive  only  that  proportion  of  the  stock  which 
the  elapsed  portion  of  the  six  years  bears  to  the  full 
period  of  six  years,  and  the  proportion  which  the  em- 
ployee is  entitled  to  receive  may  be  purchased  by  the 
company  at  par.  Beneficiaries  receive  all  dividends  de- 
clared on  the  stock  allotted  to  them. 

In  addition  to  the  stock  distribution,  employees  who 
do  their  work  in  a  careful,  workmanlike  and  satisfactory 
manner,  obey  orders  and  carefully  observe  the  rules  and 
who  have  been  in  the  continual  service  for  at  least  two 
years,  receive  a  monthly  cash  payment  in  addition  to 
wages,  as  follows:  Continuous  service  for  two  years,  5 
per  cent  of  regular  pay;  for  five  years,  10  per  cent;  for 
ten  years,  15  per  cent ;  for  fifteen  years,  20  per  cent. 

There  is  also  a  stock  subscription  plan,  adopted  in 
1915.  Employees  may  subscribe  for  stock  of  the  com- 
pany at  par,  the  total  amount  of  the  subscription  depend- 
ing upon  their  salaries,  i.  e.,  employees  receiving 
an  annual  salary  of  $1,000  or  less,  20  per  cent  of 
salary;  over  $1,000  and  not  over  $2,000,  15  per  cent;  over 
$2,000  and  not  over  $5,000,  10  per  cent;  over  $5,000,  8 
per  cent.  Stock  may  be  paid  for  outright  or  in  monthly 
installments  at  not  less  than  $2.00  per  share  per  month, 
deducted  from  salaries  or  wages.     Subscribers  receive 


77 

all  dividends  and  are  charged  5  per  cent  on  unpaid 
balances.  Employees  who  have  paid  for  their  stock  and 
who  retain  it  and  remain  in  the  company's  employ,  will 
receive  a  bonus  of  $2  per  share  for  five  years. 

In  1913,  87  employees  were  stockholders,  constituting 
11.5  per  cent  of  the  total  number  of  stockholders,  and  in 
1914,  173  employees  held  stock  constituting  21.5  per  cent 
of  the  total  number  of  stockholders. 

Atlas  Underwear  Compan-y.  .  - 

richmond,  indiana.    1916, 

V  The  company  announced  in  January  that  bonuses 
amounting  to  nearly  $10,000  would  be  paid  to  the  em- 
ployees who  remained  with  the  company  until  December 
15,  1916.  The  distribution  per  employee  will  be  between 
$12  and  $13.  Persons  entering  the  employ  of  the  com- 
pany after  February  1  will  receive,  on  December  15,  $1 
for  each  month  they  have  been  in  service.  In  addition, 
special  cash  prizes  will  be  given  as  rewards  for  faith- 
ful attendance,  punctuality  and  service. 

Walter  Baker  &  Company,  Ltd. 

manufacturers  chocolate  and  cocoa  preparations. 

boston,  mass.    1904. 

Employees  having  served  one  full  year,  are  given  a 
bonus  of  5%  of  their  earnings;  those  who  have  served 
over  that  time  receive  10%.  This  distribution  is  made 
upon  the  vote  of  the  directors  at  the  end  of  each  year  and 
depends  upon  the  profitable  outcome  of  the  year's  busi- 
ness. 

In  1914  the  company  had  650  employees. 

Beech-Nut  Packing  Company, 
pure  food  products.    canajoharie,  n.  y.    1912. 

The  company  pays  to  each  employee  who  has  been 
in  its  employ  for  at  least  one  year  $3  for  every  year  of 
service.     The  bonus  is  paid  in  cash  about  the  holiday 


78. 

period.    Of  the  total  force  of  776,  in  1914,  422  shared  in 
the  distribution. 

Bemis  Bros.  Bag  Company. 

ST.  LOUIS,  MO.     1912. 

All  officials  getting  a  salary  above  the  average  are 
given  a  bonus  depending  directly  upon  the  amount  of 
the  annual  salary  paid  and  amount  of  common  dividend 
declared  by  the  company. 

The  second  plan  applies  to  all  other  employees  of  the 
company,  and  ranges  from  2%  for  one  to  two  years' 
service  to  20%  for  over  ten  years'  service. 

It  was  inaugurated  to  encourage  faithful,  efficient 
work,  and  under  it  each  year  a  premium  is  paid  based 
upon  the  amount  of  wages  and  dependent  upon  the  length 
of  faithful,  efficient,  continuous  service. 

The  company  reports  that  the  plan  has  not  been  an 
unqualified  success  for  the  following  reasons : 

1.  From  an  economic  point  of  view,  it  has  given  too 
great  a  premium  to  the  older  employees  after  passing 
the  time  when  their  efficiency  can  be  increased  or  main- 
tained. 

2.  On  account  of  the  very  short  length  of  time  during 
which  in  these  days  most  of  the  younger  women  work, 
it  does  not  seem  to  provide  the  incentive  to  the  less  ex- 
perienced hands  which  had  been  expected. 

A  modification  of  the  plan  to  meet  these  deficiencies 
is  under  consideraton. 

Blount  Plow  Works, 
evansville,  indiana. 

There  is  a  cash  distribution,  determined  annually  by 
the  board  of  directors,  applying  purely  to  the  rank  and 
file — the  factory  operatives.  It  is  based  in  part  upon 
wages,  in  part  upon  efficiency,  and  in  part  upon  loyalty ; 
discretion  in  this  matter  is  vested  in  the  management. 
An  official  of  the  company  states  that  this  plan  "is  apt  to 
be  of  far  less  value  than  might  be  desired    *     *     *     An 


79 

amount  once  designated  as  their  share  in  the  profits,  it 
has  been  found,  can  never  be  diminished." 

There  is  also  a  plan  in  the  nature  of  a  stock  division, 
applying  to  the  executive  and  sales  departments.  Capi- 
tal stock  of  the  company  to  the  amount  of  $30,000  is  held 
in  trust  for  the  benefit  of  the  incumbents  of  certain 
offices.  The  legal  title  only  is  held  by  the  trustees,  the 
beneficiaries  receiving  every  other  privilege  and  benefit 
to  be  derived  from  the  ownership  of  the  stock. 

The  plan  of  holding  this  entire  amount  of  stock  in 
trust  was  adopted  first  because  it  retained  the  stock  in 
the  company,  and  obviated  the  necessity  of  frequent 
transfers  of  stock  on  the  books  when  promotions  were 
made. 

The  company  states  that:  ''The  stock  division  plan 
is  one  calculated  to  appeal  to  the  intelligence  of  the 
executive  branches  of  our  business  and  we  have  rea- 
son to  believe  that  it  will  prove  successful  in  its  effort 
to  give  the  salaried  man  a  taste  of  the  stockholder's 
point  of  view." 

The  Boardwalk   National.  Bank. 
atlantic  city,  n.  j.    1914. 

A  cash  distribution  is  made  to  employees,  varying 
according  to  their  salaries,  of  10%  of  the  increase  in  the 
yearly  profits  of  the  firm. 

Borden's  Condensed  Milk  Company. 

new  YORK  CITY.     1912. 

For  the  benefit  chiefly  of  the  principal  or  supervising 
employees  of  the  company,  a  profit  sharing  plan  was  put 
in  operation  in  1912,  based  upon  the  year's  record  of 
each  plant  and  upon  the  net  earnings  of  the  business.  A 
fair  average  standard  of  cost  and  product  was  estab- 
lished, after  a  study  of  comparative  results  of  operation 
for  a  period  of  years,  and  the  eligible  employees  in  any 
factory  which  comes  up  to  this  standard  in.  any  year  are 
included  in  the  profit  sharing  distribution  for  that  year. 


80 

Certain  outside  employees  such  as  stablemen  and 
wagon  drivers  are  not  included  at  present,  and  the  plan 
does  not  apply  to  salesmen  and  other  employees  who 
are  working  under  a  system  of  commissions  which 
enables  them  to  increase  their  earnings  above  regular 
salaries. 

The  distribution  is  made  if,  in  the  judgment  of  the 
directors,  the  net  earnings  are  sufficient  to  warrant  it 
after  payment  of  all  fixed  charges  and  dividends  on  the 
company's  stock.  In  some  years  the  wage  dividend  has 
been  8  per  cent,  and  in  one  year  9  per  cent.  In  one  year, 
owing  to  business  conditions,  no  profit  payments  to  labor 
were  made,  and  an  official  of  the  company  states  that  this 
caused  a  certain  amount  of  dissatisfaction,  although  he 
believes  that  the  terms  and  conditions  of  the  plan  are 
well  understood  by  the  rank  and  file,  and  that  the  falling 
off  in  salesmen's  commission  earnings  in  that  year,  due 
to  the  same  causes,  made  it  clear  to  the  other  employees 
that  no  discrimination  was  involved  in  the  temporary 
suspension  of  profit  sharing. 

Employees  are  permitted  to  apply  the  money  they 
receive  in  profit  sharing  to  the  purchase  of  stock  of  the 
company  at  par,  if  they  so  desire.  Provision  is  also 
made  whereby  employees  may  purchase  stock  of  the  com- 
pany at  the  current  market  price  under  a  plan  of  sub- 
scription and  partial  payments.  The  details  of  this  plan 
are  handled  through  an  employees'  investment  associa- 
tion, which  elects  its  own  officers  and  conducts  its  own 
affairs,  with  the  co-operation  of  the  company. 

There  are  about  10,000  employees  of  the  company,  of 
whom  approximately  860  participate  at  present  in  the 
profit-sharing  distribution.  The  management  is  not  yet 
fully  satisfied  as  to  the  merits  of  profit  sharing  in  theory 
or  in  practice,  but  expects  to  continue  the  experiment 
with  the  idea  of  modifying  or  expanding  it  as  experience 
may  suggest. 


81 

Botany  Worsted  Mills. 

passaic,  n.  j.    1915. 

In  December,  1915,  a  distribution  of  about  $31,000 
among  the  employees  was  reported,  those  in  the  service 
five  years  receiving  $10;  ten  years,  $25;  fifteen  years, 
$50;  and  twenty  years  or  more,  $100.  It  is  understood 
that  about  one  hundred  men  received  the  maximum  of 
$100  each.  It  is  not  stated  whether  a  similar  distribution 
is  to  be  made  each  year. 

Bowser  Tank  and  Pump  Works, 
fort  wayne,  ind.   1915. 

The  company  had  used  a  premium  system,  based  on 
individual  time  saving,  but  found  it  not  an  unqualified 
success,  and  in  November,  1915,  replaced  it  with  a  divi- 
dend plan  based  on  the  collective  efficiency  of  the  entire 
manufacturing  department.  The  factory  employees,  con- 
sisting of  about  550  men,  will  be  paid  monthly  a  bonus 
in  proportion  to  their  wages.  The  plan  also  includes  a 
reduction  in  the  working  day  from  9  to  8iA  hours  with 
no  reduction  in  the  day's  pay. 

The  J.  G.  Brill  Company. 

MANUFACTURERS   OF   RAILWAY  CARS,   TRUCKS,   ETC. 
PHILADELPHIA,  PA. 

A  cash  bonus  is  given  at  Christmas  time  to  all  em- 
ployees in  the  service  of  the  company  more  than  twenty- 
five  years.  Rewards  are  also  given  to  faithful  employees 
for  efficient  work,  at  the  discretion  of  the  management. 
Preferred  and  common  stock  of  the  company  is  sold  at  a 
fixed  price  to  employees  desiring  to  purchase. 

Broadalbin  Knitting  Company. 

BROADALBIN,  N.  Y.     1916. 

On  January  6, 1916,  the  employees  received  a  dividend 
of  5%  on  wages  earned  during  the  month  of  December. 
The  company  announced  that  similar  dividends  will  be 
paid  for  the  first  six  months  and  the  last  six  months  of 


82 

1916,  respectively,  to  all  employees  who  shall  have  been 
in  the  service  continuously  during  the  periods  named, 
unless  laid  off  for  lack  of  work  or  prevented  by  illness 
or  other  good  reason. 

In  order  to  share  in  this  distribution  employees  must 
be  * '  diligent  in  their  work  and  show  by  their  energy  and 
conduct  that  they  are  doing  their  part  to  make  the  busi- 
ness a  success."  The  company  states  that  if  this  scheme 
results  in  an  increased  production  of  well-made  goods 
it  will  be  continued,  dependent  upon  the  earnings  of  the 
business.  It  is  understood  that  an  expenditure  of  about 
$5,000  for  1916  is  involved. 

Builders'  Iron  Foundry, 
providence,  r.  i. 

This  company  has  in  effect  a  plan  whereby  officers 
and  leading  employees  may  purchase  debenture  certifi- 
cates in  the  nature  of  profit-sharing.  Interest  is  paid  on 
these  certificates  at  the  same  rate  as  the  dividends  on  the 
company's  stock,  but  not  less  than  6%  in  any  event. 
Payment  for  the  certificates  is  made  in  part  by  the  sub- 
scriber and  in  part  by  contributions  by  the  company, 
after  the  first  two  years,  in  proportion  to  the  annual  in- 
crease in  its  surplus.  The  subscriber  acquires  no  rights 
as  a  partner  or  stockholder  nor  does  he  become  liable  for 
any  debts  or  obligations  of  the  company. 

An  officer  of  the  company  states  that  he  has  at  times 
considered  the  idea  of  allowing  the  emplo^^ees  to  appoint 
a  representative  to  be  consulted  by  the  directors  in  re- 
gard to  matters  chiefly  affected  by  the  attitude  of  the 
men,  but  that  this  has  not  been  done  because  of  the 
following  practical  disadvantages; 

"The  man  often  times  does  not  appreciate  that 
what  is  shown  him  should  be  confidential,  and  he 
sometimes  feels  it  his  duty  to  report  to  the  men, 
and  they  feel  they  have  the  right  to  question  him 
minutely  about  everythina".  They  are  soon,  if  any- 
thing, more  suspicious  of  him  than  of  us.  He  also 
is  apt  to  be  a  man  unacquainted  with  business  and  in- 


83 

clined  to  think  profits  are  very  much  larger  than  they 
really  are  and  that  he  is  being  deceived.  If  it  is  a 
Union  shop  there  is  danger  that  he  is  really  appoint- 
ed by  the  Union  and  that  whatever  he  does  may  be 
a  move  in  play  for  business  if  nothing  more  on  their 
part.  We  have  tried,  as  a  rule,  to  make  the  fore- 
men feel  that  they  must  represent  the  men  in  all 
conferences  with  us,  and  we  have  endeavored  to 
make  the  men  feel  that  the  foremen  do  so  act." 

By-Products  Coke  Corporation, 
syracuse,  n.  y. 

The  plan  of  this  company  is  similar  to  that  of  the 
Solvay  Process  Company,  the  two  corporations  being 
very  closely  allied. 

Samuel  Cabot  Inc. 
manufacturing  chemists.    boston,  mass.    1886. 

A  certain  share  of  the  profits,  not  stated  in  advance,  is 
set  aside  every  six  months  for  division  among  employees 
in  proportion  to  their  earnings.  All  employees  who  have 
been  with  the  company  six  months,  and  who  sign  the  profit 
sharing  agreement,  are  eligible.  This  agreement  defines 
the  conditions  of  the  distribution,  and  specifies  that  any 
employee  who  is  discharged  or  leaves  the  service  in  bad 
standing  forfeits  his  share,  which  is  divided  among  the 
other  shareholders.  An  employee  who  gives  sixty  days 
notice  of  intention  to  leave  retains  his  interest  in  the  fund, 
which  is  paid  to  him  in  three  annual  installments  provided 
he  does  nothing  to  injure  the  company  in  the  meantime. 
One  half  of  each  man's  share  is  paid  to  him  in  cash  and 
the  other  half  is  invested  by  the  company  for  his  benefit. 
From  this  latter  credit,  the  company  may  at  its  discretion 
make  payments  to  the  employee  in  case  of  sickness,  and 
the  fund  may  be  mortgaged  to  help  a  man  build  a  house. 
The  average  number  of  employees  is  100,  of  whom 
about  80  particiate.  The  plan  was  adopted  because  of 
the  belief  of  Samuel  Cabot,  Sr.,  as  expressed  in  an  article 
in  the  Review  of  Reviews  some  years  ago,  that:    "At  a 


84 

very  early  period  in  my  business  experience  it  appeared 
to  me  that  the  rewards  ordinarily  offered  to  the  wage- 
earner  were  not  such  as  to  stimulate  him  to  the  best  exer- 
tion nor  foster  in  him  the  best  and  kindest  feelings  to- 
ward his  employer." 

The  present  president  of  the  company  states  his  belief 
that  the  system  is  a  success  but  doubts  whether  it  would 
be  successful  in  any  much  larger  plant. 

Cadillac  Handle  Company, 
lumber  and  broomhandles.   cadillac,  mich.   1914. 

Those  employees  who  have  been  in  the  service  of  the 
company  for  at  least  one  year  are  paid  3%  of  their  total 
earnings.  Those  who  have  been  in  the  service  two  years 
obtain  5%  ;  those  in  the  service  for  three  years  6%. 

These  payments  are  dependent,  however,  on  the  abil- 
ity of  the  company  to  make  these  distributions.  The  plan 
only  applies  to  the  rank  and  file  and  does  not  include 
heads  of  departments  or  members  of  the  office  force. 

The  company  is  ^'not  prepared  to  say  that  it  is  or 
is  not  an  unqualified  success."  The  principal  object  was 
to  promote  more  continuous  service  on  the  part  of 
employees. 

Calumet  &  Hecla  Mining  Company. 

calumet,  MICH. 

In  June,  1915,  the  company  paid  a  bonus  to  its  em- 
ployees equal  to  the  aggregate  amount  of  a  wage  reduc- 
tion in  force  from  September  1,  1914  to  May  1,  1915. 
The  former  rate  of  wages  was  restored  on  the  latter 
date.  The  reimbursement  is  stated  to  have  been  due 
to  improved  conditions  in  the  copper  industry. 

In  January,  1916,  announcement  was  made  by  this 
company  and  ten  subsidiary  mining,  railway  and  milling 
companies  that  until  July  1,  1916,  a  monthly  bonus  would 
be  paid  to  all  employees  ranging  from  one  to  ten  per 
cent  of  their  earnings.  About  14,000  men  are  affected. 
Whether  the  bonus  will  be  continued  permanently  is  not 
stated. 


85 

The  Caswellt-Runyan  Company, 
manufacturers  of  cedar  chests.    huntington,  ind. 

1915. 

In  December,  1915,  the  company  announced  the  adop- 
tion of  a  profit-sharing  plan  for  the  benefit  of  its  400  em- 
ployees. The  distribution  ranges  from  1%  on  yearly 
wages  for  those  who  have  been  in  the  service  one  year 
to  5%  for  those  who  have  remained  with  the  company 
five  years  or  longer.  The  total  of  these  payments  is 
about  $10,000. 

Champion  Spark  Plug  Company, 
toledo,  ohio.    1915. 

The  plan  is  a  qash  distribution  twice  a  year  and  is 
based  upon  wages  earned,  length  of  service,  attendance, 
etc. 

To  a  certain  percentage  of  the  total  wage  is  added  the 
total  saving  made  by  reduction  in  waste,  spoilage,  scrap, 
etc., — a  careful  record  of  this  being  kept  in  proportion 
to  the  output  of  the  plant. 

In  the  case  of  the  department  heads  and  sales  force, 
the  amount  is  directly  dependent  upon  results,  carefully 
tabulated  and  compared  for  each  six  months  period. 

Approximately  300  employees  of  this  company,  in- 
cluding salesmen,  foremen,  managers  and  other  em- 
ployees of  the  factory  participated  on  Jan.  15,  1916,  in 
the  first  profit-sharing  distribution. 

The  president  states: 

*'So  far  we  consider  the  profit-sharing  plan  with 
our  employees  a  decided  success,  although  we  shall 
unquestionably  see  a  way  of  improving  the  method  of 
handling  this  as  time  goes  on. 


J  J 


Citizens'  Trust  Company. 

UTICA,  N.  Y. 

At  the  end  of  each  year  the  employees   are   paid   a 
bonus  on  their  annual  salaries,  the  rate  depending  upon 


86 

the  amount  of  net  earnings  for  the  season.  When  the 
earnings  are  from  $50,000  to  $60,000  the  bonus  is  5%  on 
salaries,  and  the  rate  increases  by  1%  for  each  additional 
$10,000  of  earnings,  the  maximum  being  10%  when  the 
year's  business  yields  $100,000  or  more. 

The  employees  do  not  know  until  the  year  is  over 
what  the  bonus  rate  is  to  be,  and  the  company  finds  that 
this  serves  as  an  incentive  to  get  in  new  business  and  in- 
crease the  net  profits  of  the  bank,  with  very  satisfactory 
results. 

The  Cleveland  Twist  Drill  Company, 
cleveland,  ohio.    1915. 

After  8%  is  paid  on  the  company's  stock  all  additional 
dividends  declared  will  be  divided  between  the  stock- 
holders, in  proportion  to  the  amount  of  stock  held,  and 
the  employees  in  proportion  to  the  wages  earned  during 
the  preceding  year.  The  share  of  employees  who  have 
been  continuously  in  the  service  for  at  least  two  years 
will  be  at  the  same  rate  as  that  of  the  stockholders. 
Those  in  the  company's  employ  one  year  but  less  than 
two  will  receive  three-fourths  of  this  rate  and  those  in 
the  service  less  than  one  year  will  receive  one-half  the 
rate.  Only  bona-fide  employees  in  good  standing  will 
participate,  but  those  laid  off  for  lack  of  work  or  for 
sickness  will  share  to  the  extent  of  the  wages  actually 
earned  during  the  dividend  period. 

The  company  emphasizes  the  fact  that  the  plan  is 
purely  voluntary  and  that  the  right  is  reserved  to  dis- 
charge an  employee  and  thereby  terminate  his  participa- 
tion in  the  profit  division  at  any  time. 

Clipper  Belt  Lacer  Company. 

GRAND   rapids.   MICH.     1912. 

From  the  profits  of  the  year  the  company  pays  those 
employees,  who  have  been  with  it  one  year  or  less,  5% 
of  the  amount  received  as  wages  during  the  year.  This 
percentage  increases  1%  for  every  added  year  of  service 


87 

until  10%  is  reached,  where  it  remains  indefinitely.  These 
payments  are  made  provided  the  profits  for  each  year 
warrant  it.    Tliere  are  about  fifty  employees. 

The  results  of  the  scheme  are  stated  by  the  company 
to  have  been  a  reduction  of  9%  in  the  cost  of  production, 
an  increase  in  the  earnings  of  the  employees  of  19%, 
and  "a  closer  bond  of  fellowship  with  their  employees." 

CoBBs  &  Mitchell,   Inc. 

MANUFACTURERS  OP  WOOD  FLOORINGS.     CADILLAC,  N.  Y. 

1913. 

Employees  who  have  worked  for  the  company  for  one 
year  are  given  3%  of  the  year's  wages;  those  employed 
two  years,  6%  of  the  previous  year's  wages;  and  those 
employed  three  years,  10%  of  the  previous  year's  wages. 
Employees  absent  from  duty  must  provide  a  substitute, 
or  obtain  a  written  excuse  from  the  foreman  and  deposit 
same  with  the  cashier. 

The  proposition  is  stated  to  be  separate  and  distinct 
from  wages.  "The  aim  was  to  reach  the  employees  in 
place  of  the  heads  of  departments"  and  "to  secure  to  us 
regular  employment  of  our  men."  The  company  con- 
siders that  the  scheme  has  already  been  a  success.  In 
1914,  $6,758.59  was  paid  to  187  employees. 

CoDORus  Canning  Company. 

CODORUS,  PA.     1913. 

A  dividend  of  10%  on  wages  is  paid  annually  to 
employees  of  this  company,  including  the  rank  and  file. 
The  total  number  participating  is  150,  and  the  secretary 
of  the  company  states  that  the  plan  has  proved  a  success. 

Columbia  Trust  Company. 

NEW  YORK  city.     1916. 

The  company  has  established  a  special  Fund,  to  con- 
sist of  such  moneys  as  the  directors  may  appropriate 
from  time  to  time.  Five  trustees  are  placed  in  full  charge 
of  this  fund,  a  part  of  which  is  reserved  for  payment  of 


88 

pensions  and  death  benefits,  at  the  discretion  of  the  trus- 
tees, and  a  part  distributed  as  profit  sharing.  One-half 
of  any  amount  in  excess  of  $10,000.,  appropriated  to  the 
Fund  in  any  year,  constitutes  the  profit  sharing  allot- 
ment, and  the  distribution  is  in  proportion  to  salaries  and 
length  of  service.  Only  employees  who  have  been  with 
the  company  one  year  or  more  are  eligible,  and  after  five 
years'  service  an  additional  allowance  is  paid,  ranging 
from  10  per  cent  on  salaries  to  40  per  cent  to  those  em- 
ployed 20  years  or  more,  in  part  for  distribution  as  profit 
sharing  under  specified  rules  and  in  part  to  provide  a  pen- 
sion and  benefit  fund. 

The  Conklin"  Pen  Manufacturino  Company, 
toledo,  ohio.    1914. 

The  company  plan  as  adopted  provided  that  if  there 
were  a  saving  of  from  3%  to  5%  in  the  office  payroll 
for  the  comparative  periods  of  January  to  July  1  for 
each  of  the  years  1914  and  1915,  and  from  July  1  to 
December  31  of  the  same  years,  such  saving  effected 
would  be  added  to  the  office  employees'  salaries  for  the 
following  six  months'  period. 

The  company  states:  ''In  the  first  half  of  this  jesiT 
(1915),  a  saving  of  4.6%  was  effected,  which  amount 
was  added  to  the  salary  of  each  employee  on  July  1." 

Ceane  Company, 
chicago,  ill.    1900. 

Every  year  about  Christmas  time  the  company  makes 
a  cash  distribution  to  employees,  based  upon  their  earn- 
ings during  the  year.  This  is  not  guaranteed, 
but  the  actual  distribution  for  the  past  thirteen 
or  fourteen  years  has  been  at  the  rate  of  10% 
on  wages,  and  in  1915  this  involved  a  payment  of 
about  $700,000  to  approximately  10,000  employees.  Every 
employee  who  has  been  in  the  service  one  month  partici- 
pates, except  the  officials  and  those  who  hold  stock  of  the 
company.    The  distribution  does  not  depend  upon  length 


89 

of  employment,  amount  of  wages  or  efficiency  of  service. 

The  company  many  years  ago  started  profit  sharing 
among  its  employees  by  using  a  percentage  of  profits 
plan,  copied  after  that  originated  by  John  Bright  in  Eng- 
land. Profits  were  not  large  and  the  payments  being 
correspondingly  small  to  the  employees,  there  was  lack 
of  interest  in  the  plan  and  no  good  results  were  accom- 
plished. 

Later  Mr.  Crane  introduced  a  stock  subscription  plan, 
the  employees  being  permitted  to  buy  stock  outright  to  an 
amount  equal  to  their  yearly  salaries.  The  percentage 
of  employees  who  participated  was  small,  many  pre- 
ferred to  put  their  savings  into  homes,  and  unfortunate 
distinctions  and  suspicion  grew  up  between  employees 
who  owned  stock  and  those  who  did  not,  especially  in 
times  of  strikes.  A  number  of  years  ago,  when  a  dis- 
turbance arose,  some  of  the  employees  who  had  stock 
were  leaders  of  the  strike  and  this  so  discouraged  the 
company  that  the  stock  participation  plan  was  aban- 
doned. 

Later  the  company  introduced  the  plan  now  in 
existence  and  described  in  the  first  paragraph  above, 
but  even  this  plan  is  not  without  its  unsatisfactory 
features,  as  many  of  the  employees  have  grown  to  count 
upon  it  at  Christmas  and  plan  their  expenses  accordingly. 
Furthermore,  the  employees  feel  that  the  receipt  of  the 
bonus  puts  them  under  an  obligation  to  the  company  and 
they  do  not  like  to  ask  for  an  increase  in  wages,  even  when 
justly  entitled  to  it.  A  recent  and  unintended  develop- 
ment, discovered  by  one  of  the  officials  and  discontinued, 
was  the  unfair  practice,  when  taking  on  new  employees, 
of  fixing  the  initial  wage  at  such  an  amount  that  the  added 
bonus  would  only  equal  the  regular  market  wage. 

Crane  Valve  Company, 
bridgeport,  conn. 

(Now  owned  by  Crane  Co.  of  Chicago,  and  the  same  system 
of  distribution  has  been  adopted.) 


90 

Crocker,  Burbank  &  Company, 
paper  manufacturers.    fitchburg,  mass.    1908. 

Employees  who  have  been  with  the  company  for  two 
consecutive  years  are  paid,  on  December  1  of  each  year, 
a  5  per  cent  dividend  on  their  wages  earned  during  the 
twelve  months  ending  on  that  date.  Employees  who  have 
been  with  the  company  five  consecutive  years  receive  on 
July  1  an  additional  5  per  cent  on  their  yearly  wages. 
There  are  between  900  and  1,000  employees,  of  whom  700 
participated  in  the  last  dividend.  The  company  states 
that  it  has  found  each  year  that  the  number  of  employees 
who  have  been  in  its  service  for  two  years  or  more  is  in- 
creasing,  and  that  it  therefore  considers  the  plan  a  suc- 
cess. 

Dells  Paper  &  Pulp  Company, 
eau  claire,  wis. 

Beginning  March  1,  1916,  the  company,  it  is  an- 
nounced will  inaugurate  a  profit-sharing  plan  of  wages 
for  the  employees  of  the  company.  The  plan  provides 
that  the  wages  of  the  men  shall  be  treated  as  so  much 
capital  stock,  and  the  company  guarantees  a  dividend  of 
at  least  6  per  cent,  and  from  that  up  to  8  or  10  per  cent. 


Diamond  State  Fibre  Company. 

BRIDGEPORT,  PA.     1915. 

The  company  announced  in  December,  1915,  that  divi- 
dends to  labor  would  be  paid  every  three  months  if  the 
results  proved  satisfactory,  on  the  condition  that  ''there 
will  be  no  dividends  when  there  are  no  profits."  The 
distribution  will  be  based  on  the  wages  earned  by  the 
employees  during  the  previous  thirteen  weeks,  and  the 
profits  earned  by  the  company  during  the  same  period. 
The  first  dividend,  paid  January  1,  1916,  amounted  to 
6%  on  the  employees'  wages  for  the  13  weeks  ending 
December  18. 


91 

=  The  Dold  Company. 

buffalo.  n.  y.    1913. 

Rewards  for  promptness,  efficiency  and  courtesy,  in 
the  form  of  prizes,  are  distributed  by  the  company  annu- 
ally through  the  medium  of  an  employees'  mutual  bene- 
fit association.  The  distribution  is  in  fixed  amounts  based 
upon  the  profits  earned  by  the  company.  In  addition, 
there  is  a  cash  bonus  to  such  of  the  foremen  as  are  con- 
sidered to  have  earned  it,  upon  the  same  grounds.  It 
is  reported  that  the  amount  distributed  to  15  of  the  34 
foremen  at  the  end  of  1915  was  about  $2,000,  while  more 
than  $16,000  was  divided  among  approximately  700  mem- 
bers of  the  employees'  association. 

DURANT-DORT   CARRIAGE   CoMPANY. 
(See  Stock  Ownership) 

The  Emporium, 
department  store.    san  francisco,  cal.    1913. 

Every  employee,  except  executives  and  heads  of 
departments,  who  has  been  in  the  employ  of  the  com- 
pany one  year  and  under  three,  receives  at  Christmas 
1%  of  his  year's  salary.  Every  employee  on  the  pay- 
roll three  years  and  under  five,  receives  21/2%  of  his 
salary.  Every  employee  on  the  payroll  five  years  and 
over  receives  5%. 

The  company  reports:  "We  regard  the  profit-shar- 
ing plan  an  unqualified  success." 

Federal  Motor  Truck   Company, 
rochester,  n.  y. 

All  employees  of  the  company,  including  the  ofiicials, 
receive  at  Christmas  time  a  bonus  on  their  yearly  wages 
and  salaries.  In  December,  1915,  the  rate  paid  was  10% 
to  all  who  had  been  with  the  company  a  full  year  or  more, 
7V1>%  to  those  from  nine  months  to  one  year  in  the  serv- 
ice, and  5%  to  those  employed  from  six  to  nine  months. 

A  distribution  similar  in  character  has  been  made  in 
previous  years,  the  object  being  to  build  up  a  permanent 


92 

force.  The  vice  president  of  the  company  states  that 
during  1915  the  number  of  employees  who  had  been  a 
year  or  more  in  the  service  was  25%  greater  than  during 
the  previous  year. 

Fels  and  Company, 
manufacturers  of  soap.    philadelphia,  pa.    1901. 

A  percentage  of  wages,  based  on  length  of  service,  is 
given  at  the  end  of  each  year.  There  is  one  rate  for 
those  employed  less  than  three  years  and  a  higher  rate 
for  those  employed  more  than  three  years.  All  regular 
employees  are  included.  The  company  considers  that 
the  plan  '4s  a  success  in  many  respects,  but  has  some 
features  not  satisfactorv.  We  have  reason  to  believe 
that  most  make  very  good  use  of  the  portion  received,  but 
some  do  not.  .  .  .  As  in  most  profit  sharing  schemes 
there  is  an  element  of  arbitrariness  which  must  be  got 
over  before  profit  sharing  can  be  said  to  be  unqualifiedly 
a  success." 

Ferracute  Machine  Company, 
bridgeton,  n.  j.   1915. 

On  account  of  prosperous  business,  the  company  in 
1915  paid  bonuses  on  wages  earned  by  employees 
amounting  to  5%  for  the  first  six  months  of  the  year,  7% 
for  the  next  three  months,  and  10%  for  the  last  three 
months.  For  the  first  quarter  of  1916  it  is  expected  that 
the  payment  will  be  10%,  but  whether  it  will  be  contin- 
ued thereafter  the  company  is  not  in  a  position  to  state. 
There  are  about  200  employees,  all  of  whom  participate. 
The  company  considers  the  plan  satisfactory  and  states 
that  ''we  prefer  this  arrangement  rather  than  suddenly 
advancing  the  wages  because  it  is  naturally  easy  to  ad- 
vance the  wages  but  it  is  very  hard  to  lower  them." 

Forstmann  and  Huffman. 

TEXTILE  manufacturers.     PASSAIC,  N.  J.     1915. 

In  December,  1915,  the  company  distributed  a  bonus 
of  between  $35,000  and  $40,000  among  1,G00  of  its  4,000 


93 

employees,  as  a  mark  of  appreciation  of  faithful  service. 
Those  who  had  worked  for  the  company  from  two  to 
four  years  received  $10;  four  to  six  years,  $20;  six  to 
eight  years,  $30 ;  eight  to  ten  years,  $40 ;  and  employees 
in  the  service  continuously  for  ten  years  received  $50. 
It  was  not  stated  whether  the  distribution  will  be  contin- 
ued in  future  years. 

Frost  Gear  and  Forge  Company, 
jackson,  mich. 

After  setting  aside  10%  for  stockholders,  a  portion  of 
the  excess  profits  is  divided  among  certain  employees  in 
proportion  to  salaries,  but  participation  is  limited  to 
foremen  and  those  above  them,  including  officers  of  the 
company.  The  company  states  that:  "The  workmen  in 
the  shop  do  not  participate,  but  get  their  extra  incentive 
from  the  ordinary  piece  work  which  we  employ  in  the 
forge  department,  or  premium  which  we  use  in  the  gear 
department."  (Not  true  profit  sharing,  under  standard 
definition.) 

The  share  of  profits  received  by  officers  and  foremen 
is  not  paid  in  cash,  but  stock  representing  the  share  of 
each  is  held  in  the  treasury  for  three  years,  when  it  is 
issued  to  the  individual  whether  he  is  then  in  the  employ 
of  the  company  or  not.  Dividends  on  this  stock  are  paid 
in  the  meantime. 

The  company  states  that  its  object  was  to  tie  to  it  the 
men  who  have  been  faithful  and  who  have  taken  a  lively 
interest  in  the  welfare  of  the  business.  As  profits  in- 
crease the  percentage  set  aside  for  employees  becomes 
greater,  it  being  t>e  company's  expectation  that  this 
''would  spur  the  employees  to  a  very  extra  effort,"  and, 
further,  that  although  the  plan  is  not  entirely  satisfac- 
tory the  company  is  not  able  to  devise  one  that  will  meet 
the  requirements  any  better. 


9-i 

Fulton  Bag  &  Cotton  Mills, 
atlanta,  ga.    1912. 

For  the  first  three  months  of  employment,  each  em- 
ployee receives  at  the  end  of  that  period  a  premium  or 
bonus  of  3  per  cent  of  the  wages  earned.  At  the  end  of 
the  second  three  months,  he  receives  a  bonus  of  5  per 
cent  of  the  wages  earned  during  that  period,  and  at  the 
end  of  the  next  six  months,  which  would  complete  one 
year's  employment,  he  receives  a  premium  of  7  per  cent 
of  his  wages  during  the  preceding  six  months.  Each  six 
months  thereafter  he  receives  this  7  per  cent  premium. 
All  employees  on  the  company's  pay  roll,  with  the  excep- 
tion of  those  in  the  office,  are  eligible  to  this  premium. 

Gardner  News  Company, 
gardner,  mass.    191g. 

On  February  1  the  company  issued  a  letter  to  its  em- 
ployees, eleven  in  number,  not  including  officials,  to  the 
effect  that  it  did  not  feel  justified  in  increasing  their 
wages,  believing  the  existing  scale  equal  to  that  found 
in  similar  offices,  and  that  under  less  prosperous  condi- 
tions it  might  prove  necessary  to  withdraw  such  increase 
if  made.  Instead,  there  would  be  paid  on  the  first  day 
of  February  and  of  August,  to  employees  who  had  been 
with  the  company  for  more  than  one  year,  a  certain  per- 
centage of  the  gross  business  transacted  during  the  pre- 
ceeding  six  months,  in  each  case,  in  proportion  to  the 
wages  of  each  individual. 

Garner  Print  Works  and  Bleachery. 
garnerville,  n.  y.    191g. 

On  the  first  of  January  about  500  employees  of  the 
company  were  awarded  a  bonus  of  10  per  cent  on  wages, 
in  proportion  to  efficiency.  The  rank  and  file  as  well  as 
heads  of  departments  are  eligible.  It  is  stated  that  the 
bonus  will  be  figured  on  weekly  earnings  but  paid  at  the 
end  of  each  month,  and  that  the  payments  at  present 


95 

amount  to  about  $800  per  week  on  a  pay  roll  of  approxi- 
mately $8,000. 

Geneeal.  Chemical  Company. 

NEW  YORK.     1915. 

This  plan  has  been  changed  from  time  to  time.  The 
one  in  operation  in  December,  1915,  is  described  by  the 
company  as  follows : 

"This  year  the  distribution  of  the  profit  sharing 
fund  goes  not  only  to  the  managers,  heads  of  depart- 
ments and  superintendents,  but  also  to  every  other 
employee  of  the  company.  For  the  managers  a  more 
or  less  arbitrary  amount  was  set  aside,  but  the  men 
were  paid  on  the  basis  of  10  per  cent  of  wages  re- 
ceived to  all  who  have  been  with  the  company  for  a 
year  or  longer  and  5  per  cent  to  those  who  have  been 
with  the  company  less  than  one  year.  This  bonus 
was  paid  in  cash.  In  the  case  of  the  wage-earners  in 
many  instances,  we  distributed  pass-books  on  local 
savings  banks  after  arranging  with  the  banks  to 
keep  open  two  or  three  evenings  in  order  to  permit 
the  men  to  take  as  much  or  little  of  the  bonus  away 
in  cash  as  they  themselves  desired,  it  not  being  our 
intention  in  any  way  to  control  the  money  after  it 
once  passed  into  their  hands.  It  is  of  interest  to 
note  that  in  manv  cases  we  have  reports  that  a  large 
percentage  of  the  men  in  the  reporting  factories 
have  left  their  entire  bonus  in  the  local  savings  banks. 
We  regard  the  distribution  as  onlv  an  evidence  of 
our  desire  to  establish  a  real  spirit  of  co-operation 
between  the  stockholders  and  the  workers. ' ' 

General  Electric  Company, 
schenectady,  n.  y.    1916. 

The  company  has  announced  under  date  of  March  18 
that  a  sum  has  been  set  aside  sufficient  to  permit  the  pay- 
ment, to  all  employees  (other  than  directors  and  general 
officers),  who  have  been  in  its  service  continuously  for 
five  years  or  more,  of  a  supplementary  compensation 
equivalent  to  5  per  cent  of  their  individual  earnings  for 
the  six  months  ended  respectively  June  30  and  December 


96 

31,  1916.  It  has  been  estimated  that  these  distributions 
will  amount  in  the  aggregate  to  between  $3,000,000  and 
$5,000,000.  There  are  about  50,000  employees  in  all  the 
plants  of  the  company,  of  whom  a  very  large  proportion 
have  been  in  the  service  at  least  five  years  and  are  there- 
fore eligible  to  participate. 

The  company  also  has  in  operation,  at  its  Schenectady 
plant,  an  investment  club  through  which  employees  may 
invest  their  savings  in  stock  of  the  company  upon  pay- 
ment of  $5  per  month.  This  requires  a  saving  of  $60  per 
year  for  a  period  of  about  three  years,  to  complete  the 
purchase  of  one  share.  Early  in  1915,  shortly  after  the 
organization  of  this  club,  it  had  attained  a  membership 
of  800  subscribers. 

The  investment  plan  of  the  National  Lamp  Works,  of 
Cleveland,  (having  twenty  odd  plants  in  various  parts 
of  the  country,  with  an  average  of  500  employees  each) 
presents  an  illustration  of  the  great  risk  an  employer 
takes  when  he  assumes  the  responsibility  of  aiding  his 
employees  to  make  investments.  In  1911,  the  executive 
heads  had  devised,  by  a  leading  securities  company,  a 
plan  under  which  there  were  organized  two  investment 
companies  to  receive  the  deposits  of  the  employees  of  the 
different  lamp  works.  They  were  termed  the  **Nela 
Alpha  Investing  Company"  and  the  *'Nela  Alpha  An- 
ticipation Company."  Heads  of  departments  and  office 
employees  in  all  the  plants  were  induced  to  deposit  a 
certain  percentage  of  their  monthly  salaries.  The  inten- 
tion was  to  include  the  rank  and  file  by  means  of  a  stamp 
system  but  this  was  not  carried  out. 

The  sincerity  of  purpose  in  this  undertaking  is  in- 
dicated by  the  following  extract  from  a  letter  written  by 
F.  S.  Terry,  leading  official  of  the  Lamp  Works,  May  9, 
1912: 

''Our  opinion  is  that  we  shall  benefit  our  em- 
ployees as  much  by  inducinjr  them  to  save  their 
money  as  by  any  form  of  profit-sharing  distribution, 
and  we  are  doing  all  we  can  to  acquaint  them  with 


97 

the  character  of  different  classes  of  investments  so 
that  their  savings  will  neither  be  invested  in  Govern- 
ment bonds  nor  in  savings  banks,  both  of  which  yield 
small  returns;  nor,  on  the  other  hand,  will  they  be 
invested  in  highly  speculative  enterprises  where  the 
risks  are  liable  to  be  too  great." 

Certificates  of  participation  in  the  Investing  Com- 
pany were  issued  to  savers  whose  deposits  had  reached 
$100.  After  having  paid  in  given  amounts  (decided  upon 
by  the  organizers),  the  savers  received  common  stock 
certificates  which  participated  in  the  surplus  earnings 
over  and  above  6  per  cent  on  the  preferred  stock. 

Through  the  Anticipation  Company,  funds  similarly 
received  were  invested  in  speculative  stocks  and  new  of- 
ferings, such  as  the  common  and  preferred  stocks  of  lead- 
ing public  utilities,  in  which  there  was  a  gambling  chance 
to  make  unlimited  profits.  The  promoters  of  the  plan 
reserved  the  privilege  of  transferring  or  assigning  all 
their  rights  thereunder,  at  any  time,  and  expressly 
stipulated  in  the  subscription  agreement  that  no  fiduciary 
relation  of  any  kind  was  assumed  nor  any  obligation  to 
undertake  or  carry  out  the  plan. 

For  several  years  past,  the  stock  of  the  Investing  and 
Anticipation  Companies — that  purchased  by  the  em- 
ployees— has  had  no  market  value  except  that  made  by 
the  holders  (men  and  women)  as  they  have  sold  to  one 
another,  for  the  reason  that  some  of  the  securities  held 
by  those  two  companies  had  a  severe  shock.  Three  years 
ago,  for  example,  the  stocks  of  one  of  the  public  utilities, 
in  which  part  of  the  funds  of  the  foregoing  companies 
had  been  invested,  sold  as  high  as  $144  but  since  that  time 
has  been  as  low  as  $40  per  share.  Quite  recently  that 
particular  stock  has  almost  regained  its  original  market 
value.  However,  the  anxiety  of  the  officials  of  the  Lamp 
Works  (who  went  so  far  as  to  try  to  protect  the  em- 
ployees' funds  with  their  own  money  and  to  have  a  broker 
popularize  trading  in  the  preferred  stocks),  as  well  as 


98 

the  disturbed  mental  state  of  the  depositors,  who  could 
not  at  any  time  realize  on  their  investments  except  at  a 
great  loss,  indicate  the  unfortunate  situation  which  may 
arise  from  such  recommendation  of  industrial  invest- 
ments where  the  employees  are  not  guaranteed  against 
depreciation  in  the  market  value  of  the  securities.  In 
this  instance,  a  committee,  consisting  of  the  chief  officials 
and  others,  was  appointed  to  superintend  the  investing 
of  the  employees'  funds;  but  the  experience  shows  what 
blunders  may  be  made  by  big  business  men,  even  with 
the  best  intentions.  Also,  there  has  been  created  a 
tendency  on  the  part  of  the  employees  to  take  an  interest 
in  the  stock  market  not  regarded  as  wholesome. 

Genung,  McAedle  &  Campbell, 
dry  goods  stores.    mt.  vernon,  n.  y.    1913. 

After  the  net  profits  of  the  year  earned  by  the  various 
departments  have  been  determined,  a  certain  sum  is  set 
aside  for  each  department  to  be  distributed  as  a  bonus 
among  the  individual  clerks,  the  sums  paid  them  varying 
according  to  the  amount  of  goods  sold,  condition  of  stock, 
and  interest  and  loyalty  displayed. 

Managers  of  certain  departments  are  given  an  interest 
varying  from  20  to  30  per  cent  of  the  net  profit  of  their 
departments.  From  this  amount  the  salary  or  drawing 
account  is  first  deducted,  and  the  balance  paid  by  check. 

The  company  reports  the  plan  satisfactory  to  date. 

Geeman-American  Button  Co. 

ROCHESTER,  N.  Y. 

In  the  sharing  of  profits  among  the  heads  of  depart- 
ments and  the  rank  and  file,  both  in  cash  and  stock  dis- 
tributions, there  are  taken  into  consideration  all  possible 
factors  such  as  length  and  quality  of  service,  individual 
achievements,  and  faithful  attendance.  In  some  depart- 
ments, half  the  operators  have  been  recipients  but  the 
general  average  is  less  than  one-quarter  of  the 
employees. 


99 
P.  H.  Glatfelter  Company. 

PAPER  MANUFACTURERS.     SPRING  GROVE,  PA.     1916. 

The  company  introduced  a  profit  sharing  plan  in  J  an- 
uary,  based  upon  wages  and  length  of  service.  All  the 
215  employees  are  eligible.  It  is  stated  that  employees 
who  have  been  with  the  company  one  year  will  receive  a 
cash  dividend  on  their  wages  earned  during  that  period, 
equal  to  the  rate  paid  on  the  company's  stock.  The  com- 
pany states  that  continuance  of  the  plan  will  depend  upon 
whether,  at  the  end  of  the  year,  it  has  proved  a  success. 

The  Globe  Tobacco  Company, 
detroit,  mich.    1886. 

Peculiar  arrangement  by  which  company  handed  over 
to  labor  union  one  per  cent  of  gross  receipts,  to  be  paid 
to  employees  pro  rata.  Necessitated  because  state  laws 
prevented  the  plan  of  cooperation  desired  by  the  com- 
pany. The  latter  enthusiastic  at  the  time  of  publication 
by  N.  P.  Gilman  (1889). 

The  Great  Department  Store,  Inc. 
lewiston,  me.    1900. 

After  the  profits  of  the  business  have  been  figured  out 
each  year,  cash  dividends  computed  on  their  salaries  are 
paid  to  employees  who  are  members  of  the  Co-Workers' 
Club,  which  is  open  to  all  who  have  been  with  the  com- 
pany for  six  months  and  who  pay  the  dues  of  $1.00  a  year. 

The  last  dividend  paid  was  at  the  rate  of  121/4  per 
cent. 

Wm.  H.  Grundy  Company,  Inc. 
bristol,  pa.    1916. 

It  was  announced  in  January  that  on  June  30,  1916,  a 
bonus  of  5  per  cent  will  be  given  to  all  employees  on  their 
wages  for  the  preceding  six  months,  provided  they  have 
been  in  the  employ  of  the  company  one  year.  To  those 
who,  on  June  30,  have  been  on  the  pay  roll  four  and  one- 
half  months  a  bonus  will  be  paid  of  21/0  per  cent  on  wages 


100 

actually  earned  during  that  period.     Whether  the  plan 
will  be  continued  permanently  is  not  stated. 

Gulp  Bag  Company. 
new  orleans,  la. 

For  a  number  of  years  an  annual  cash  bonus  has  been 
paid  to  employees,  based  upon  length  of  service.  Those 
who  have  been  with  the  company  one  year  receive  2% 
on  the  wages  earned  during  that  period;  for  two  years' 
service  the  rate  is  4%,  and  the  amount  increases  by  2% 
for  each  additional  year  up  to  20%  for  employees  of  ten 
years'  or  more  standing. 

In  the  distribution  of  January,  1916,  123  of  the  213 
shop  employees  were  eligible,  and  of  these  23  were  in 
the  10-year  class  and  17  in  the  1-year  class.  Ninety  who 
had  been  with  the  company  less  than  one  year  were  pre- 
sented with  $1  each. 

The  company  also  pays  interest  at  5%  on  savings 
deposited  by  employees,  up  to  $1,000. 

The  bonus  distribution  includes  a  few  office  employees 
and  salesmen,  and  employees  who  earn  more  than  $1,800 
salary  per  year  receive  a  certain  share  in  the  dividends 
declared  by  the  company. 

The  company  considers  that  the  plan  pays,  because  it 
keeps  the  plant  manned  with  an  exceptionally  good  force. 

Haines,  Jones  «&  Cadbury  Co. 

MAKERS   OF  PLUMBING  SUPPLIES.     PHILADELPHIA,  PA.     1886. 

An  officer  of  the  company  states : 

About  thirty  years  ago  we  adopted  a  plan  of  distrib- 
uting money  among  our  employees  based  on  our  profit 
and  based  on  their  wages  or  salaries.  When  we  had  good 
years  this,  of  course,  was  satisfactory  to  our  employees, 
but  when  the  poor  times  came  they  were  dissatisfied  and 
after  trying  it  for  about  five  years,  we  discontinued  that 
plan. 

For  about  twenty  years,  we  had  a  plan  of  making  a 
cash  disbursement  to  certain  of  our  employees  that  we 


101  '  • 

thought  were  entitled  to  it.  This  was  not  based  on  tlieit 
wages  but  was  an  arbitrary  matter  passed  upon  by  the 
president  of  our  company. 

For  the  past  few  years,  we  have  set  aside  from  our 
earnings  5%  on  the  capital  invested  in  our  business, 
charged  oft'  for  bad  debts,  depreciations,  etc.,  and  then 
tool^  25%  of  the  balance  and  put  it  into  a  fund  for  dis- 
tribution among  our  employees.  The  employees  were  di- 
vided into  two  classes,  one  class  getting  about  90%  of 
this  fund  and  the  other  class  about  10%. 

We  employ  from  350  to  500  people.  This  cash  dis- 
bursement is  made  mostly  to  department  heads  and 
some  of  the  rank  and  file  and  includes  about  fifty. 

Our  branch  stores  are  operated  on  rather  a  different 
plan — the  manager  getting  a  certain  percentage  of  the 
profits  and  then  if  we  make  over  a  certain  amount,  we 
distribute  2i/,%  among  the  employees  of  the  branch — 
taking  in  mostly  the  heads  of  departments  and  not 
paying  very  much  attention  to  the  rank  and  file. 

Our  salesmen  operate  on  a  profit-sharing  contract  but 
it  is  most  too  complicated  to  undertake  to  explain.  The 
arrangement  which  we  have  made  with  our  salesmen  has 
been  quite  satisfactory  and  the  last  plan  which  we  have 
adopted  for  distribution  of  cash  bonuses  has  been  more 
satisfactory  than  any  that  we  have  previously  adopted, 
but  it  is  not  entirely  so  because  a  great  many  of  our  em- 
ployees do  not  thoroughly  understand  the  difficulties  of 
conducting  a  large  business  and  that  the  profits  vary 
greatly  in  different  years  depending  upon  conditions 
oftentimes  which  are  entirely  beyond  the  control  of  the 
management.  Our  people  are  beginning  to  understand 
it,  however,  better  and  better  every  year  and  we  believe 
that  we  have  made  some  progress  and  that  the  arrange- 
ment has  been  a  beneficial  one  to  our  interests. 

C.  F.  Hall,  Company. 

DEPARTMENT  STORE.     DUNDEE,  ILL.     1902. 

Every  six  months  the  company  makes  a  distribution 


102 

among  all  its  clerks  of  1%  of  its  cash  sales  during  that 
period.  The  basis  of  distribution  is  the  amount  of  wages 
received  by  each  clerk,  and  it  aggregates  about  the  equiv- 
alent of  a  month's  wages. 

The  company  regards  the  plan  as  successful  and  states 
that  from  1902  to  1914  it  has  distributed  to  its  clerks 
under  the  plan  approximately  $13,000. 

Hamburg-American  Steamship  Company, 
hoboken,  n.  j.  1914. 

The  company  distributes  an  annual  bonus  of  ten  per 
cent  among  the  employees.  The  amount  of  the  distribu- 
tion is  determined  by  the  rate  of  dividend  declared  each 

7^^^-  Hoboken  Observer,  Apr.  27,  1914. 

Hamilton-Beach  Company, 
racine,  wis. 

It  has  been  announced  that  a  profit  sharing  plan  with 
the  employes  would  be  started. 

Milwaukee  (Wis.)  Sentinel,    March  21,  1916. 

Hammond  Typewriter  Company. 

NEW  YORK. 

For  some  years  prior  to  the  European  War  the  com- 
pany paid  each  employee  a  quarterly  gratuity,  the  amount 
of  which  was  based  on  length  of  service:  for  three 
months'  service  50%  of  one  week's  salary,  for  six  months' 
service  55%,  increasing  at  the  rate  of  5%  for  each  addi- 
tional three  months'  service  up  to  five  years,  when  an 
employee  received  the  equivalent  of  a  full  week's  salary. 

In  describing  the  plan  the  company  states  that  these 
gratuities  were  colloquially  called  ** dividends"  and  were 
paid  whether  the  company  made  a  profit  or  not,  ''and 
so  actually  they  were  not  profit  shares  at  all." 

Regarding  the  success  of  the  plan  the  company  says : 

**  About  the  only  difficulty  we  had  with  the  system 
was  that  many  of  the  employees  ceased  to  regard  the  pay- 
ments as  gratuities  and  thought  of  them  as  vested  rights, 


103 

with  the  result  that  they  resented  the  suspension  of  the 
payments.  If  the  payments  had  been  suspended  at  any 
time  other  than  in  a  business  crisis,  we  are  inclined  to 
believe  that  there  would  have  been  troublesome  dissatis- 
faction. In  other  words,  the  payments  so  completely 
lacked  the  character  of  actual  profit  sharing  that  in  the 
eyes  of  the  employees  the  fact  that  the  companj^  was 
making  no  profits  would  not  have  been  regarded  by  the 
employees  as  a  sufficient  reason  for  suspending  any  pay- 
ment. ' ' 

In  consequence  of  the  shutting  off  of  export  busi- 
ness, by  the  European  war,  the  company  has  temporarily 
suspended  these  gratuities,  but  expects  to  resume  them 
when  business  warrants. 

Heebner  &  Sons. 
manufacturers  of  threshers.    landsdale,  pa.    1913. 

After  a  fair  profit  on  the  year's  business  is  reserved 
by  the  proprietor,  a  voluntary  distribution  is  made  to 
employees,  in  the  form  of  a  stated  percentage  on  their 
yearly  earnings.  In  1913,  10%  on  wages  was  paid  to  80 
employees ;  in  1914  and  1915, 12%.  The  proprietor  states : 
*'We  think  it  a  success,  inasmuch  as  it  is  an  incentive 
to  our  employees  to  see  that  our  business  is  profitable. 
If  it  is  not  profitable,  they  will  get  nothing  above  their 
wages." 

Hendrick  Manufacturing  Company, 
carbondale,  pa.    1916. 

Each  man  and  boy,  numbering  approximately  two 
hundred  and  fifty,  who  has  been  in  the  employment  of 
the  corporation  a  year  or  over  received  on  Feb.  22,  1916, 
a  bonus  of  five  per  cent  out  of  the  profits  which  the  com- 
pany made  during  1915.  These  employees  do  not  include 
the  office  force. 

Many  of  the  men  employed  by  the  company  have  held 
down  their  jobs  from  boyhood  almost  to  old  age.     The 


104 

men  employed  in  the  various  departments  are  all  experts 
in  their  several  lines,  even  among  the  laborers. 

Not  a  man  who  is  the  beneficiary  of  it,  had  the  slightest 
idea  until  he  opened  his  pay  envelope  that  he  was  to  re- 
ceive a  substantial  bonus  with  his  wages.  Not  a  single 
order  was  accepted  by  the  company  last  year  for  war 

material.  Carbondale  Pa.  Leader,  Feb.  23,  1916. 

Hercules  Powder  Company, 
wilmington,  del.   1913. 

The  employees  were  divided  into  five  classes,  accord- 
ing to  length  of  service  from  one  to  fifteen  years,  and 
announcement  was  made  that  wages  of  the  employees  in 
the  several  classes  would  be  increased  from  2  to  20% 
respectively.  While  termed  a  "wage  increase,"  however, 
the  company  also  refers  to  it  as  a  "bonus,"  of  a  purely 
voluntary  character,  and  "reserves  the  right  to  with- 
hold it  for  justifiable  reasons,  either  permanently  or 
temporarily,  from  any  individual  or  all  employees."  It 
was  the  intention  of  the  company  to  continue  the  plan 
indefinitely,  "providing  we  secure  the  cooperation  of  our 
pay  roll  employees  in  the  faithful  performance  of  their 
duties  and  adherence  to  the  company's  rules  and  our  men 
make  it  evident  that  they  desire  to  benefit  by  the  increases 
provided  through  continuous  or  uninterrupted  service." 

Hershey  Chocolate  Company. 

HERSHEY,  pa.     1908. 

At  the  end  of  each  fiscal  period,  a  sum  is  set  aside 
and  divided  among  employees  who  have  been  in  the 
company's  service  during  the  preceding  six  months.  The 
amounts  given  to  each  are  in  proportion  to  their  salaries 
or  wages.  In  1914,  this  extra  compensation  amounted  to 
20%  on  wages,  and  the  total  distribution  was  nearly 
$100,000.  On  January  1,  1916,  of  the  whole  force,  86% 
of  the  force  received  the  bonus.  When  it  was  first  given, 
only  20%  could  qualify.  The  percentage  has  steadily 
increased.    The  amount  this  time  exceeds  $100,000.    All 


105 

employees,  from  office  boys  to  executives,  figure  in  the 
distribution. 

The  company  considers  that  the  plan  helps  to  elim- 
inate the  ''rolling  stones"  and  to  encourage  saving  and 
home  building. 

The  company  has  been  sued  by  a  former  employee 
for  a  bonus  claimed  to  be  due  him  for  past  services,  and 
it  is  stated  that  the  decision  in  this  case  will  determine 
the  outcome  of  several  similar  suits  against  the  com- 
pany by  former  employees. 

HiBBABD,  Spencer,  Baetlett  &  Company. 

HARDWARE.    CHICAGO,  ILL. 

At  the  end  of  each  year,  from  the  profits  of  the  busi- 
ness, employees  receive  a  certain  percentage  of  their 
salaries,  varying  according  to  length  of  service.  In  1914 
the  percentage  was:  one  year's  service  2%,  two  years 
4%,  three  years  6%,  and  four  years  or  over  8%. 

The  total  payment  varies  according  to  the  profits  of 
the  year. 

The  unique  feature  of  the  plan  is  that  only  one-half 
of  the  amount  given  to  the  employees  is  directly  paid  to 
them,  the  other  half  being  deposited  to  their  credit  in 
savings  banks  designated  by  them. 

J.  F.  HiNK  AND  Sons  Company. 

EUREKA,  CAL. 

This  is  one  of  the  few  mercantile  establishments  on 
the  Pacific  Coast  paying  annual  dividends,  or  profits  to 
its  employees.  Since  the  inauguration  of  the  plan,  the 
company  has  paid  out  more  than  $4,000  to  its  clerks.    The 

plan  is  based  on  merit.  Eureka  Cal.  Times,  March  1.  1916. 

Home  Furniture  Company, 
manufacturers  of  furniture.    york,  pa.  1914. 

A  cash  distribution  is  made  at  the  end  of  the  year, 
based  upon  the  wages  earned  by  the  employees  during 
that  period.     All  employees  in  the  service  of  the  com- 


106 

pany  at  the  end  of  the  year  participate,  and  about  100  are 
affected.  It  is  reported  that  the  total  distribution  in 
January,  1916,  amounted  to  about  $2,000. 

Hotel  Vendome. 

minneapolis,  minn.    1912. 

All  wages  paid  to  employees  during  the  year  are 
charged  to  a  so-called  wages  account.  At  the  end  of  the 
year,  36%  of  the  total  wages  account  and  36%  of  the  nel 
profits  of  the  business  for  the  year  are  credited  to  the 
wages  account. 

A  share  of  the  profits  is  paid  to  the  employees  at  the 
same  rate  on  wages  as  the  percentage  of  excess  of  credits 
to  wages  account  over  charges  to  wages  account.  If  the 
credits  to  wages  account  are  less  than  the  charges,  no 
profits  are  shared.  The  ratio  of  wages  and  profits  was 
fixed  in  1912  ''thus  promising  a  bonus  in  case  the  profits 
could  be  increased  without  increasing  the  wages."  If  the 
wages  of  any  employee  are  automatically  increased  by 
reason  of  any  state  or  national  law,  that  employee's 
share  in  the  profits  is  computed  on  the  basis  of  his  pre- 
vious salary  and  the  amount  of  the  wage  increase  de- 
ducted from  his  share  in  the  profits. 

HouK  Manufacturing  Company. 

MANUFACTURERS  OF  WIRE  WHEELS.     BUFFALO,  N.  Y.     1915. 

In  December,  1915,  the  company  announced  that  it 
had  opened  accounts  in  a  certain  savings  bank  to  the 
credit  of  the  individual  employees,  to  the  number  of  near- 
ly 300,  and  that  in  December,  1916,  all  holders  of  pass- 
books who  were  still  in  the  company's  employ,  and  who 
had  themselves  deposited  not  less  than  $1.  a  week  during 
the  year,  would  be  credited  by  the  company  with  a  pre- 
mium on  such  accounts  at  the  rate  of  10  per  cent  per  an- 
num, in  addition  to  the  regular  interest  paid  by  the  bank. 


107 

Hudson  Motor  Car  Company, 
detroit,  mich. 

It  is  the  custom  of  the  company  to  give  each  year,  as 
a  Christmas  present,  a  week's  extra  pay  to  workingmen 
who  have  been  in  the  service  six  months,  and  the  same  to 
oflQce  employees  who  have  been  with  the  company  one 
year  or  more.  The  total  distribution  amounts  to  about 
$20,000.  a  year. 

HuGHES-0 'ROURKE    CONSTRUCTION    CoMPANY. 
DALLAS,  TEXAS.     1914. 

A  profit-sharing  plan  was  inaugurated  by  increasing 
the  salaries  of  the  employees  and  setting  aside  20  per 
cent  of  the  net  profits  of  the  company  for  apportionment 

among  the  employees.  Dallas  News,  April  12,  1914. 

International  Harvester  Company. 

See  Stock  Ownership. 

International  Motor  Company. 

ALLENTOWN,  pa.     1915. 

An  announcement  by  the  company  was  reported  in 
xiugust,  that  a  "war  bonus"  aggregating  20  per  cent  of 
the  total  monthly  earnings  would  be  paid  to  its  employ- 
ees on  the  first  of  each  month. 

It  was  stated  that  the  bonus  was  in  recognition  of 
exceptional  business  created  by  the  war,  and  that  the  ob- 
ject was  to  retain  good  employees  and  build  up  a  strong 
and  permanent  organization. 

This  distribution  is  typical  of  special   and   probably 
temporary  bonuses  paid  by  many  large  corporations  en 
gaged  in  fulfilling  war  contracts,  on  the  theory  of  shar- 
ing with  the  employees  some  of  the  extraordinary  profits. 

Joliet  Grain  Company. 

JOLIET,   ill.     1916. 

A  year  ago  the  Joliet  Grain  Company,  a  cooperative 
organization,  after  a  record  year,  announced  that  if  dur- 
ing 1915  the  profits  of  the  organization  exceeded  25  per 


108 

cent  it  would  adopt  a  profit-sharing  plan  with  the  em- 
ployees. 

Last  night  at  a  meeting  of  the  company  the  six  em- 
ployees were  presented  with  $48,  each  being  one  dollar  a 
week  for  each  week  since  the  announcement  of  the  bonus. 

Joliet  (in.)  News,  March  5,  1916. 

King  Motor  Car  Company, 
detroit,  mich. 

A  certain  sum  of  money  is  set  aside  at  the  close  of 
each  year  to  make  a  bonus  payment  to  employees.  This 
sum  has  been  approximately  7VL.%  of  the  net  earnings. 
Each  employee  receives  about  10%  of  the  amount  of  his 
yearly  wages. 

KOHLER  Co. 
KOHLER,  WIS.     1916. 

Each  employee  will  be  given  a  bonus  of  10  per  cent  of 
his  total  monthly  wage  or  salary  for  a  perfect  attendance. 
It  employs  more  than  1,000  men  and  women.  A  maxi- 
mum bonus  is  set. 

St.  Louis  (Mo.)  Post-Dispatch,  March  10,  1916. 

Larkin  Company. 

soapmakers,  chemists,  etc.    buffalo,  n.  y. 

The  clerks  in  the  sales  department  receive  a  bonus 
each  month  equal  to  one-tenth  of  their  aggregate  month- 
ly P^y  I'oll.  The  amount  of  bonus  to  each  clerk  depends 
upon  salary  and  considerations  of  individual  merit,  such 
as  helpfulness,  loyalty,  application,  deportment  and  at- 
tendance. Questions  of  merit  are  decided  by  bonus  com- 
mittees composed  of  five  members,  elected  by  the  clerks 
in  each  section.  These  committees  award  "bonus  points," 
up  to  ten,  at  the  end  of  each  month. 

Another  form  of  extra  distribution  by  this  company 
is  the  payment  of  a  rate  of  interest  higher  than  normal 
on  a  savings  fund,  in  which  there  are  deposits  of  $200,000. 
by  1200  employees.    The  rate  paid  is  5%. 


109 

There  are  about  200  employed  in  the  sales  depart- 
ment, who  participate  in  the  plan. 

Lilly  Carriage  Company. 

MANUFACTURERS  OF  CARRIAGES,  HARNESS  AND  AUTO- 
MOBILES. MEMPHIS,  TENN. 

A  certain  portion  of  the  net  profits  over  6%  is  divided 
among-  the  men  who  have  been  in  the  company's  employ 
for  one  year.  The  employees  are  skilled  mechanics,  and 
the  amount  is  divided  in  proportion  to  their  wages.  TJie 
plan  applies  to  the  rank  and  file  and  department  heads, 
bul  not  to  the  office  force. 

Herbert  M.  Lloyd. 

Tlic  details  of  a  profit-sharing  plan  which  has  just 
been  put  into  operation  by  a  company  in  which  Mr.  Lloyd 
is  interested  will  be  found  included  with  his  views  on  the 
snl)ject  in  general  in  the  chapter  on  "Opinions  ot' 
American  Employers". 

Louisville  Varnish  Co. 
louisville,  ky. 

Every  emploj^ee  who  has  been  with  the  company  a 
year  receives  a  bonus  of  ten  per  cent  on  his  salary.  Tlie 
president  of  the  company  states  that  they  are  very  care- 
ful that  the  salaries  paid  by  them  are  as  much  as  or 
more  than  those  being  paid  by  others  for  the  same  kind 
of  service.  In  further  explanation  he  says  that  the 
plan  "of  course  is  really  not  on  a  profit-sharing  basis, 
but  is  a  bonus  or  a  present,  and  as  philanthropy  or  benev- 
olence does  not  belong  in  business,  we  worked  up  a  plan 
looking  to  the  distribution  of  a  certain  percentage  of  the 
gross  profits  of  the  company." 

Under  date  of  Nov.  2,  1914,  the  president  stated  that 
it  was  his  expectation  "to  develop  the  principle  so  as  to 
virtually  eliminate  the  wage  system,  which  is  almost  the 
fundamental  of  the  I.  W.  W."  Later,  in  June,  1915,  he 
wrote  in  further  comment  upon  this  idea:  "Last  year^ 


110 

we  were  expecting  to  develop  this  matter  even  further 
and  do  away  with  wages  entirely,  but  the  fall  trade  was 
so  unsatisfactory  that  the  employees  would  have  been 
the  losers  by  the  contemplated  change;  therefore  it  was 
not  put  into  effect." 

Lowe  Beothers  Company. 

PAINT  AND  VARNISH  MAKERS.     DAYTON,  OHIO. 

Under  the  will  of  a  former  president  of  the  company, 
the  income  from  his  interest  in  the  business  is  divided 
among  the  employees.  For  the  purpose  of  distribution, 
the  employees  were  divided  by  him  into  three  classes : 
(1)  Those  receiving  $1,000.  or  under;  (2)  those  receiving 
from  $1,000.  to  $2,500.;  and  (3)  those  receiving  $2,500.  or 
more.  The  current  dividends  on  this  fund  are  divided 
into  three  parts  and  each  part  is  then  divided  among  the 
number  of  employees  in  that  class.  The  president  of  the 
company  says: 

* '  I  do  not  consider  the  plan  an  unqualified  success, 
and  therefore  I  am  trying  to  work  out  a  better  one, 
but  so  far  have  been  able  to  conceive  of  no  plan  other 
than  steady  work,  fair  wage  and  reasonable  condi- 
tions under  which  to  work,  that  will  stimulate  the 
rank  and  file." 

The  Walter  M.  Lowney  Company. 

MANUFACTURERS   OF  CHOCOLATES.     BOSTON,  MASS.     1903. 

Employees  of  all  grades  who  have  been  in  the  com- 
pany's service  for  one  year  and  have  done  satisfactory 
work  are  given  a  bonus  at  the  expiration  of  that  period. 
The  bonus  is  based  on  the  weekly  wage  for  the  year  and 
varies  in  different  instances.  Occasionally  the  bonus  is 
withheld  as  a  penalty  for  carelessness. 

The  system  is  the  outgrowth  of  a  distribution  of 
'Christmas  bonuses  to  certain  employees,  which  rapidly 
grew  to  include  the  entire  force  of  more  than  1,000  em- 
ployees. The  company  reports  that  the  result  has  been 
■satisfactorv    but    that    the    establishment  of  a  definite 


Ill 

minimum  wage  by  the  State  of  Massachusetts  might  lead 
to  abandonment  of  the  bonus  plan  and  the  combining  of 
wages  and  profit  sharing  in  a  single  item  of  wages. 

MacDonnell,  Department  Stores, 
boston,  mass.    1904. 

Employees  receive  2%  of  the  receipts  during  a  cer- 
tain week  in  the  year  known  as  employees '  week. 

Majestic  Manufacturing   Company. 

IRON  ranges,  water  HEATERS,  ETC.     ST.  LOUIS,  MO. 

All  employees  who  have  been  with  the  company  for 
two  years  or  more  receive  a  premium  for  continuous  and 
loyal  service,  on  the  following  basis :  for  two  years '  serv- 
ice, $10;  four  years  $20;  six  years  $30;  and  so  on  to  a 
maximum  of  $100.  for  twelve  years  or  over.  The  premium 
is  paid  in  cash  shortly  before  Christmas. 

The  company  established  the  eight  hour  day  twenty 
years  ago,  and  claims  to  pay  the  highest  wages  for  the 
class  of  work  performed.  In  December,  1914,  223  em- 
ployees participated,  the  aggregate  amount  then  paid 
approximating  $8,000.  The  average  number  of  employ- 
ees is  485. 

Maxwell  Motor  Company. 

VINCENNES,  IND.     1914. 

A  distribution  of  ten  per  cent  of  the  year's  profits 
was  made  among  the  employees  who  remained  with  the 
company  for  a  year.  Forty-one  employees  participated 
in  the  first  distribution  and  each  employee  who  had  been 
with  the  company  only  a  month  or  two  was  also  given  a 
check.  The  men  were  advised  to  apply  the  check  on  a 
home  or  deposit  it  in  a  savings  bank. 

Mechanicville  Knitting  Company. 
men's  wool  and  cotton  underwear.     mechanicville, 

N.  Y.     1910. 

Every  employee  who  has  been  in  the  service  of  the 
company  for  one  year  receives  the  equivalent  of  a  week's 


112 

salary  at  Christmas.    The  total  distribution  amounts  to 
about  $1,000.    There  are  100  employees. 

The  company  reports  that  the  plan  has  been  success- 
ful and  that  there  has  never  been  a  strike  of  any  nature 
among  the  employees. 

Metropolitan  Life  Insurance  Company, 
new  york  city. 

The  Metropolitan  Life  Insurance  Company  estab- 
lished in  1900  a  system  of  company  contribuiions  to  a 
savings  fund  in  wliich  its  employees  may  be  voluntary 
depositors.  Agents,  superintendents,  assistants,  clerks 
in  the  home  office  or  any  employee  not  in  receipt  of  the 
higher  grades  of  salary  may  pay  into  the  fund  an  amount 
annually  not  to  exceed  a  certain  per  cent  of  one's  salary. 
The  fund  is  administered  by  a  board  of  trustees  made  up 
of  seven  officers  and  other  members  of  the  staff.  The 
company  contributes  an  amount  equal  to  50  per  cent  of 
the  amount  paid  in  by  the  members.  A  depositor  may 
withdraw  from  the  fund  at  any  time  he  so  desires  and 
for  any  cause.  If  he  voluntarily  retires,  he  can  take  out 
of  the  fund  all  the  money  he  has  put  in  plus  all  interest 
accumulations,  and  in  the  year  of  withdrawal  3  per  cent 
from  the  last  interest  day  to  the  date  of  withdrawal.  If 
he  stays  in  the  fund  until  permanently  disabled  or  he 
dies,  his  contributions  with  interest  and  the  company's 
contributions  of  50  per  cent  and  interest  are  paid  in 
one  sum  to  his  heirs  in  case  of  death,  or  to  himself  in 
case  of  invalidity. 

The  growth  of  the  fund  in  membership  and  money 
has  been  steady.  For  example,  on  December  31, 1904,  the 
membership  was  5,067  and  the  accumulations  $333,511.98. 
The  voluntary  withdrawals  during  the  year  had 
aggregated  $29,886.27  and  the  company's  subscription 
$34,031.64,  while  flie  forfeitures  were  $9,103.60.  The 
interest  paid  was  5.25  per  cent,  and  the  additions  to  the 
three  classes  of  membership  2.58,  4.50  and  3.47  per  cent, 
making   in   case  of  the  three  classifications  the  average 


113 

rate  of  earnings  7.83,  9.75  and  8.72  per  cent.  On  Decem- 
ber 31,  1915,  the  membership  had  grown  to  8,842.  The 
voluntary  withdrawals  during  the  year  aggregated  $199,- 
266.25.  The  amount  of  the  company's  subscription  was 
$138,587.28,  and  the  forfeitures  $86,290.58.  The  total 
amount  of  the  fund  was  $2,971,038.24.  The  earnings  of 
the  contributors  to  the  fund  had  been:  For  2,818  Class 
A  members  (clerical  force),  interest  5.00,  forfeiture  1.43, 
making  the  average  rate  6.43  per  cent ;  for  4,396  Class  B 
members  (agents),  interest  5,  forfeiture  4.68,  total  9.68 
per  cent;  and  for  1,628  Class  B  members  (superintend- 
ents, assistants,  etc.),  interest  5,  forfeiture  4.68,  total 
9.68  per  cent. 

The  earnings  indicated  by  these  percentages  are  in 
addition  to  the  50  per  cent  subscribed  by  the  company. 
For  years,  the  total  amount  received  by  the  depositors 
had  been  over  10  per  cent  of  their  deposits.  Illustrations 
of  the  growth  of  individual  sums  in  the  fund  are  seen  in 
the  fact  that  one  member  whose  deposits  amounted  to 
$1,803  had  to  his  credit  in  the  fund  $6,000.  A  superin- 
tendent who  had  deposited  $950  had  received  additions 
of  $1,578.  An  assistant  who  had  deposited  $1,193  had  to 
his  credit  $4,050.  An  agent  who  had  deposited  $1,160 
had  to  his  credit  $3,408. 

Milwaukee  Gas  Light  Company, 
milwaukee,  wis. 

Every  six  months  the  employees  are  paid  a  share  in 
the  profits,  at  a  percentage  upon  wages  earned  during 
the  preceding  six  months,  somewhat  in  excess  of  that  paid 
on  the  capital  stock  of  the  company.  Employees  to  par- 
ticipate must  have  been  with  the  company  one  year,  and 
must  have  worked  five  months  out  of  each  six  months' 
period,  unless  absent  on  account  of  sickness  or  for  other 
special  reasons.    Officers  of  the  company  are  not  included. 

The  company  reports  that  it  does  not  consider  the 
plan  an  unqualified  success.  It  has  promoted  regularity 
of  employment  but  the  gift  of  additional  money  twice  a 


114 

year  has  had  bad  effects  on  the  habits  of  certain  of  the 
men.  The  regular  employees  in  time  consider  the  extra 
money  as  a  part  of  their  wages  and  not  as  a  bonus  for 
good  behavior  and  steady  work.  The  company  also 
points  out  that  one  of  the  objections  to  the  system  is 
that  all  share  equally;  ''the  man  who  barely  escapes  dis- 
charge is  treated  just  as  well  as  the  best  and  most 
efficient  in  the  organization.  Of  course,  this  is  an  in- 
herent defect  in  nearly  all  of  the  profit  sharing  plans 
and  one  which  is  difficult  to  eliminate  successfully." 

Minneapolis  Bedding  Company. 

manufacturers  of  metal  beds  and  bedding.    minne- 
apolis, minn.    1915. 

After  paying  stockholders  7%  on  the  book  value  of 
the  company's  stock,  creating  a  sinking  fund  equal  to 
5%  of  the  outstanding  preferred  stock,  writing  off  an 
amount  not  to  exceed  5%  of  the  book  value  of  buildings 
and  machinery,  for  wear  and  tear,  the  remaining  profits 
of  the  company  are  divided  between  the  stockholders 
and  the  employees.  An  employee  earning  $1,000  a  year 
shares  equally  with  the  stockholder  having  stock  of  a 
book  value  of  $1,000.  Employees  must  have  served  the 
company  nine  months  before  being  eligible.  An  account- 
ant is  employed  by  the  employees  to  ascertain  the  profits 
for  the  year. 

A  general  committee  to  represent  the  employees  is 
elected,  with  three  members  from  each  of  the  eight  de- 
partments, and  the  company's  announcement  states  that: 
"No  foreman  is  eligible  to  a  place  on  this  committee, 
but  the  foremen  will  be  invited  in  by  the  management  at 
all  conferences."  It  is  also  provided  that  the  share  of 
profits  that  would  accrue  to  transient  labor  shall  be  used 
for  shop  betterment,  ''and  if  found  necessary  both  the 
employees  and  the  stockholders  will  be  expected  to  con- 
tribute their  share  for  additional  shop  betterment  from 
time  to  time.    But  no  more  than  10%  of  said  profits  shall 


115 

be  employed  in  additional  shop  betterment  in  any  one 
year." 

The  corporation  has  about  200  employees  and  a  paid 
up  capital  of  $425,000.  Payroll  and  salaries  amount  to 
$150,000. 


J.    P.    MOBGAN    AND    CoMPANY, 
BANKERS,   NEW   YORK  CITY. 

The  200  employees  of  the  firm  receive  bonuses  at  the 
end  of  the  year,  varying  in  amount  somewhat  according 
to  the  profitableness  of  the  business.  The  distribution  in 
December,  1915,  is  understood  to  have  been  double  that 
of  the  previous  year  and  was  made  at  the  rate  of  20 
per  cent  on  annual  salaries  for  those  in  the  employ  of 
the  firm  less  than  ten  years,  and  30  per  cent  for  those 
employed  more  than  ten  years. 

Murphy  Varnish  Company, 
newark,  n.  j. 

It  has  been  the  custom  of  this  company  for  a  number 
of  years  to  pay  all  employees  a  bonus  of  5  per  cent  of 
their  year's  wages  or  salaries,  in  cash,  at  Christmas- 
time. 

New  Jersey  Zinc  Company. 

ALLENTOWN,  pa.     1916. 

The  company  announced  in  January  that  a  certain 
sum  had  been  set  aside  out  of  the  net  earnings  for  pay- 
ment to  the  employees  of  a  bonus  of  10%  on  wages  earned 
during  1915.  Only  those  who  have  been  with  the  com- 
pany at  least  one  year  are  eligible  and  the  payment  is 
said  to  be  purely  a  gratuity,  not  affecting  wages  or  sal- 
aries. The  bonus  will  be  paid  in  four  installments  dur- 
ing 1916  to  those  who  are  still  in  the  company's  employ 
on  the  first  pay  day  after  Jan.  1,  May  1,  August  1,  and 
December  1,  respectively. 


116 

Newport  Daily  News. 
newport,  r.  i.    1901. 

A  cash  distribution  is  made  annually  to  employees 
who  have  been  with  the  newspaper  a  full  year,  in  the  pro- 
portion which  the  individual  employee's  wages  bear  to 
the  t^ntire  pay  roll.  About  45  of  the  57  employees  are 
eligible.    The  president  of  the  company  says: 

"The  plan  was  established  voluntarily  upon  wlial 
I  believe  is  correct  principle.  I  am  not  sure  that  il 
has  increased  interest  and  so  it  may  or  may  not  be  n 
commercial  success." 

Charles  F.  Notes  Company, 
real  estate.    new  york  city.    1911. 

An  annual  cash  distribution  of  profits  is  made  to  i\\\ 
emploj'ees,  from  office  boys  to  heads  of  departmoiits,  II jo 
total  number  being  about  35.  It  is  based  upon  efficiency, 
loyalty  and  length  of  service.  The  company  considers  it 
an  unqualified  success,  on  the  ground  that  its  business  has 
increased  during  a  period  of  depression  in  the  real  estate 
market. 

Orr  Felt  and  Blanket  Company, 
piqua,  ohio.    191g. 

In  February,  182  employees  of  the  company  received 
bonuses  of  from  $35  to  $40  in  recognition  of  faithful  and 
continuous  service  during  the  preceding  year.  The 
awards  are  stated  to  have  been  on  a  graduated  scale  in 
proportion  to  individual  earnings.  The  employees  par- 
ticipating are  those  who  had  been  in  the  service  of  the 
company  through  the  calendar  year  1915  continuously, 
unless  absent  by  reason  of  sickness.  About  260  people 
are  employed.  It  is  not  announced  whether  similar  dis- 
tribution will  be  made  hereafter. 

Oswego  Machine  Works. 
OSWEGO,  N.  y. 

Every  employee  of  five  years  or  more  continuous 
service  has  an  amount  of  money  credited  in  an  interest 


117 

account.  The  amount  is  determined  by  the  proprietor 
and  is  proportioned  to  the  length  of  service.  Certificates 
are  issued,  representing  this  credit  account,  as  "in  a 
small  way  an  appreciation  of  faithful  service  and  con- 
stant effort  to  help  improve  the  quality  and  quantity  of 
output."  Interest  is  paid  on  this  money  twice  yearly. 
The  full  amount  of  these  certificates  is  payable  in  cash 
at  the  end  of  ten  years  from  date  of  issue,  or  it  is  paid 
to  the  individual's  estate  immediately  in  case  of  his 
death. 

Interest  at  higher  than  normal  rates  is  paid  by  the 
company  on  employees'  savings  accounts,  the  rate  being 
at  least  670,  or  as  much  more  as  may  be  justified  by  the 
earnings. 

Mr.  Niel  Gray,  Jr.,  the  proprietor,  says:  *' Oswego 
Machine  Works  is  not  a  corporation,  but  only  one  name 
under  which  I  do  business,  and  there  are  therefore  no 
shares  of  stock.  It  would  seem  that  the  men's  oppor- 
tunity is  better  thus  than  in  the  purchase  of  stock  of  an  in- 
dustry, which  is  not  always  marketable  and  which  may  be 
subject  to  market  fluctuations.  The  objection  to  the 
Oswego  plan  might  seem  to  be  more  from  the  standpoint 
of  the  employer,  but  when  the  esprit  de  corps  is  con- 
sidered, it  is  doubtful  whether  the  guaranteed  value  and 
interest  of  the  investment  is  questionable  or  not." 

Patterson-Allen  Engineekino  Company. 
new  york  city. 

When  the  company's  earnings  are  more  than  is  re- 
quired for  the  regular  dividend  to  stockholders,  a  share 
is  reserved  for  distribution  among  faithful  employees, 
entirely  at  the  discretion  of  the  management.  There  are 
no  rules  governing  the  distribution.  The  president  of 
the  company  says: 

*  *  We  recently  had  a  strike,  brought  about  by  out- 
side union  men  wishing  to  compel  us  to  work  but 
eight  hours  a  day,  which  we  did  not  yield,  our  men 
all  being  satisfied  with  their  pay  and  all  of  them  en- 


118 

tirely  willing  to  work  the  nine  hours,  with  the  ex- 
ception of  a  few  who  have  left  our  employ." 

The  Peerless  Plush  Manufacturing  Company, 
paterson,  n.  j.    1913. 

A  fund  of  $7,000,  representing  a  portion  of  the  com- 
pany's profits  for  the  year,  was  distributed  among  the 
450  employees  at  Christmas  time.  The  share  of  each 
was  based  on  his  regular  wages  and  the  number  of  weeks 
he  had  worked  during  the  year.  In  explanation  of  this 
payment,  the  company  issued  the  following  statement  to 
its  employees: 

'*This  money  is  not  a  gift  or  a  bonus;  it  repre* 
sents  something  which  you  have  earned  and  which 
was  not  counted  in  your  wages.  By  continuing  to 
make  your  work  count  for  economy,  for  time  and 
material,  and  working  hand  in  hand  with  the  man- 
agement, we  hope  to  make  a  profit  for  you  each  year. ' ' 

In  September,  1915,  the  president  of  the  company 
stated  that  they  were  not  in  a  position  to  give  any  par- 
ticulars in  regard  to  profit  sharing,  as  they  had  been  only 
trying  an  experiment, 

Pennsylvania  Engineering  Company, 
blast  furnace  constructors.    new  castle,  pa.    1916. 

In  December,  1915,  the  company  announced  that  if 
the  earnings  of  the  business  during  1916  were  sufficient 
after  payment  of  an  8  per  cent  dividend  on  the  stock,  a 
bonus  on  wages  would  be  given  to  employees  who  had 
been  with  the  company  three  months  or  longer.  The 
bonus  will  be  10  per  cent  or  less,  as  may  be  justified  by 
the  amount  of  the  net  earnings.  There  are  about  500 
employees. 

Pfanstiehl  Company, 
manufacturers  of  ignition  specialties.    north 

chicago,  ill.    1915. 

Beginning  in  December,  1915,  the  company  placed  its 
employees  on  a  profit  sharing  basis  by  distributing  a 


119 

bonus  of  2  per  cent  on  their  wage  earnings  of  the  pre- 
ceding year.  A  part  of  the  first  distribution  was  de- 
scribed as  payment  for  services  rendered,  and  a  part  in 
consideration  of  the  honesty,  integrity  and  good  faith  of 
the  employees  in  the  performance  of  their  duties.  The 
company  states  that  it  expects  to  continue  the  plan  in- 
definitely. There  are  about  170  employees,  and  the 
December  payment  was  understood  to  have  been  between 
$3,000  and  $4,000. 

Plymouth  Cordage  Company, 
north  plymouth,  mass.    1912. 

When  the  company  is  unusually  prosperous  and  able 
to  pay  the  stockholders  an  extra  dividend,  the  employees 
are  allowed  to  share  in  the  extra  profits.  They  are  given 
the  same  percentage,  based  on  wages,  that  the  stockhold- 
ers receive. 

The  custom  is  to  give  the  investors  4  per  cent  upon 
their  capital,  the  company  considering  that  to  be  a 
fair  return.  Anything  earned  in  addition  is  regarded  as 
an  extra  dividend. 

During  the  hearings  before  the  State  Arbitration 
Board  in  connection  with  the  settlement  of  a  dispute 
lately,  the  men  stated  that  they  would  prefer  not  to  have 
the  profit-sharing  arrangement,  because  those  who 
leave  the  employ  of  the  company  have  no  opportunity  to 
participate,  and  they  prefer  to  have  any  increases  in 
regular  weekly  wages. 

The  Pullman   Company. 

CHICAGO. 

Car  service  employees  who  have  been  in  the  service 
fifteen  years  or  more,  receive  at  the  end  of  each  year  5% 
of  their  total  annual  earnings. 

The  same  class  of  employees  who  have  been  in  the 
company's  employ  one  year  or  more  receive  a  month's 
pay  as  a  reward  for  a  clear  record  during  the  year. 


120 
Reed-Prenttce  Company. 

MANUFACTURERS  OF  MACHINE  TOOLS.     WORCESTER,  MASS. 

1915. 

A  so-called  ''war  bonus"  was  paid  to  the  employees 
in  September,  1915,  and  continued  monthly  thereafter, 
the  total  for  the  first  four  months  being  about  $32,009. 
About  775  employees  shared  in  the  January  distribution, 
approximately  550  of  whom  were  machinists. 

A  strike,  which  is  understood  to  have  been  for  recog- 
nition of  the  machinists'  union,  was  begun  at  this  plant 
about  the  time  of  the  inauguration  of  these  bonus  pay- 
ments. When  the  company  is  operating  with  its  full 
complement  of  help  the  distribution,  if  continued,  will 
affect  about  1,500  men. 

Remy  Electeic  Company", 
anderson,  ind.    1915. 

A  system  of  profit  sharing  was  inaugurated  by  this 
company  by  the  distribution  of  cash  gratuities  at  Christ- 
mas time  to  about  75  employees,  in  proportion  to  length 
of  service  and  responsibility  of  positions  held.  It  was 
stated  that  next  year  this  distribution  will  be  also  in  pro- 
portion to  the  earnings  of  the  company,  in  order  to  fur- 
nish an  incentive  to  employees  to  cut  down  costs  and  in- 
crease their  efficiency. 

Roos  Brothees. 

RETAIL  STORES.     SAN  FRANCISCO,  CAL.     1915. 

In  December,  1915,  this  firm  divided  a  share  of  its 
profits  among  the  employees  in  its  three  stores.  The 
heads  of  departments  and  their  assistants  participated 
directly  in  the  distribution  and  all  other  employees  who 
had  been  with  the  firm  one  year  or  more  received  prem- 
ium-paid insurance  policies  for  $250,  $500  and  $1,000, 
respectively,  according  to  length  of  service.  The  firm 
has  between  500  and  600  employees. 


121 
RuMFORD  Chemical  Woeks. 

PROVIDENCE,  R.  I. 

The  employees  who  have  been  in  the  service  of  the 
company  continuously  for  two  years  receive  at  the  end 
of  that  period  a  bonus  equivalent  to  5%  of  their  annual 
wage.  All  employees  participate  from  department 
heads  down  to  and  including  the  rank  and  file. 

The  company  formerly  had  a  plan  of  giving  such 
bonuses  graduated  according  to  the  number  of  years  in 
the  service  and  the  amount  of  wages  received  but  gave 
it  up  because  it  became  too  burdensome.  It  regards  the 
present  plan  as  "very  beneficial  to  us  in  making  our 
help  especially  loyal." 

Russell  Manufacturing  Company, 
middletown,  conn. 

Announcement  has  been  made  by  the  company  that  a 
10  per  cent  dividend  would  be  paid  to  all  employees  on 
April  1,  based  on  the  amount  earned  since  Jan.  1.  The 
company  also  said  that  if  the  present  ratio  of  earnings 
continued  they  would  be  able  to  make  a  similar  payment 
on  July  1,  and  at  later  dates.  The  dividend  will  apply 
to  all  employees,  both  in  the  offices  and  in  the  mills.  The 
company  now  has  practically  1200  hands  working. 

Boston  Transcript,  March  22,  1916. 

Stephen  Sanfoed  and  Sons,  Inc. 
carpet  manufacturers.    amsterdam,  n.  y.    1915. 

At  the  end  of  the  year,  the  company  announced  that 
operatives  who  had  been  in  its  employ  two  years  would 
be  paid  a  bonus  of  2%  on  wages  earned  during  1915; 
those  in  the  service  four  years  would  receive  3% ;  six 
years,  4% ;  and  eight  years  5%.  The  mills  employ  about 
3,000  operatives  and  it  was  understood  that  the  bonus 
outlay  would  approximate  $75,000.  Whether  it  will  be 
continued  from  year  to  year  is  not  stated. 


l'>2 
Sears,  Roebuck  &  Co. 

MAIL  ORDER   HOUSE.      CHICAGO,   ILL.     1912. 

Each  employee  receiving  a  salary  not  exceeding  $1,- 
500  per  year  who  has  been  with  the  company  at  least  five 
years,  is  given  5%  of  his  last  year's  salary;  if  he  has 
been  with  the  company  six  years,  6%,  and  so  on  until 
10%  is  reached.  After  ten  years,  the  percentage  re- 
mains 10%. 

Seneca  Falls  Mfg.  Co. 
seneca  falls.  n.  y.   1915. 

At  the  end  of  each  month  the  company  adds  to  the  pay 
of  all  employees  10  per  cent  of  the  amount  earned  by 
them  during  that  period. 

The  company  states  that  it  decided  to  share  the  prof- 
its with  the  employees  because  of  the  prosperous  times 
and  the  fact  that  it  had  little  competition  in  the  vicinity. 

Shepherd  Construction  Company, 
wilkes-barre,  pa. 

The  company  states  that  about  twenty  years  ago  it 
attempted  an  experiment  in  profit-sharing  but  later  on 
restricted  it  to  foremen  and  heads  of  departments,  on 
account  of  losses  and  annoyance  experienced  through 
constant  difficulties  with  organized  labor. 

Nevertheless,  in  December,  1914,  a  new  plan  was  put 
in  operation  under  which  all  employees  who  have  been 
with  the  company  one  year  receive  a  dividend  on  their 
annual  wages.  The  first  distribution  was  made  in  Jan- 
uary, 1916,  at  the  rate  of  8  per  cent  on  the  year's  wages. 
If  the  result  proves  to  be  increased  efficiency  and  inter- 
est, it  is  stated  that  the  employees'  share  in  the  profits 
will  undoubtedly  be  increased,  but  the  company  regards 
the  plan  thus  far  as  purely  experimental.  The  president 
states : 

*'We  do  not  discriminate  in  our  employment  of 
labor;  politics,  religion  and  organizations  have  nothing 
whatever  to  do  with  our  employment  of  men.     We  do 


123 

sisk  that  they  be  fitted  for  the  position  which  they  are 
seeking,  by  prior  experience  and  training." 

Shuttleworth  Bros.  Company, 
rug  manufacturers.    amsterdam,  n.  y.    1916. 

The  company  announces  that  on  July  1,  they  will 
pay  a  bonus  of  from  one  to  five  per  cent  to  employees 
of  the  plant.  This  distribution  will  be  made  semi-annual- 
ly, on  July  1  and  January  1,  of  each  year.  On  July  1,  of 
this  year  all  men  and  women  employed  in  the  plant  for  a 
period  not  less  than  one  year  will  be  entitled  to  a  bonus 
for  the  preceding  six  months'  work. 

Those  employed  by  the  concern  for  a  period  of  one 
year  will  receive  one  per  cent  of  their  total  wage  during 
that  period ;  for  two  years,  two  per  cent  and  so  on  up  to 
five  years  service.  Those  in  the  employ  of  the  company 
five  years  or  more  will  receive  a  bonus  of  five  per  cent. 

Ernest  Simons  Manufacturing  Company. 

'  manufacturers  of  sheets,  pillow  cases,  etc.    port 

chester,  n.  y.    1910. 

All  operatives  who  have  been  continuously  in  the  em- 
ploy of  the  company  through  the  calendar  year  receive, 
on  the  next  ensuing  February  15,  a  bonus  of  5%  of  the 
wages  earned  during  that  period.  Of  the  800  employees 
about  600  participate.  If  the  business  does  not  warrant 
a  5%  distribution  a  smaller  amount  will  be  paid  if  pos- 
sible. In  1915  no  distribution  was  made  on  account  of 
relatively  small  profits  earned.  In  February,  1916,  there 
was  a  5%  distribution  among  900  employees.  An  offi- 
cial of  the  company  makes  the  following  comment  on 
the  plan: 

'*We  are  inclined  to  the  belief  that  there  is  a  slight 
increase  of  loyalty  and  that  thrift  is  somewhat  encour- 
aged but  find  no  diminution  of  cost  to  manufacture.  * 
*  *  We  consider  this  distribution  a  good  investment, 
— not  so  much  that  our  employees  are  any  more  loyal, 
but  we  think  thev  feel  that  thev  are  somewhat  interested 


124 

in   the   work   and   that   this   interest   redounds   to   our 
benefit." 

Alexander  Smith  and  Sons, 
carpet  manufacturers.   yonkers,  n.  y.   1911. 

Employees  who  have  been  in  the  service  of  the  com- 
pany for  ten  or  more  years  receive  semi-annually  an 
amount  equal  to  10%  of  their  earnings  for  the  last  pre- 
ceding six  months.  Those  in  its  service  between  five  and 
ten  years  receive  a  bonus  equal  to  5%  of  their  earnings 
for  each  six-month  period.  It  is  reported  that  about 
$600,000  has  been  distributed  since  the  inauguration  of 
the  plan,  the  last  semi-annual  payment  being  about 
$75,000. 

Smith,  Taylor  and  Company. 

MANUFACTURERS  OF  CHILDREN'S  CLOTHING.     BOSTON,  MASS. 

At  the  end  of  the  year,  employees  are  given  a  bonus 
for  regular  and  prompt  attendance  at  work.  The  bonus 
is  5%  on  wages,  for  those  in  the  firm's  employ  before 
April  1,  of  the  given  year,  and  4%  for  those  beginning 
work  between  April  1  and  June  30.  Employees  who  are 
late  one  minute  during  the  week  lose  the  bonus  for  that 
week,  and,  except  for  the  six  days  given  as  vacation  they 
must  not  be  absent  more  than  twelve  days  during  the 
year  for  any  cause. 

The  company  has  found  that  the  plan  has  been  of 
service  in  helping  keep  employees  during  the  rush  sea- 
sons, and  has  generally  increased  the  efficiency  of  the 
force,  but  finds  that  only  about  one-third  of  the  em- 
ployees secure  the  bonus. 

SoLVAY  Process  Company. 

SYRACUSE,  N.  Y.     1888. 

The  executive  officers,  foremen  and  sub-foremen 
share  in  a  profit  distribution  proportional  to  salaries 
and  based  on  the  amount  of  dividends  paid  to  stock- 
holders.    Participants   are   divided   into   three   classes. 


125 

Members  of  the  second  group  receive  double,  and  mem- 
bers of  the  third  group  receive  three  times  the  propor- 
tion paid  to  members  of  the  first  group.  Eligibility  to 
these  classes  depends  upon  the  nature  of  the  work  per- 
formed, length  of  service  and  record  of  the  employee. 

In  addition,  a  bonus  plan  was  put  into  effect  in  1910 
whereby  all  employees  not  sharing  in  the  percentage  of 
profit  plan  were  given  a  certain  sum  depending  upon 
the  amount  of  salary  and  length  of  service.  Employees 
in  the  service  of  the  company  for  two  years  receive  2 
per  cent  of  their  salary,  and  the  rate  increases  up  to  6 
per  cent  for  those  who  have  been  with  the  company  ten 
years  or  more. 

With  reference  to  the  practical  effects  of  the  plan, 
the  company  states: 

''This  plan  puts  a  premium  on  length  of  service 
and  has  reduced  the  number  of  changes  in  the  work- 
ing force.  The  men,  we  believe,  are  benefited  by  it, 
because  by  receiving  a  lump  sum  once  a  year,  they 
are  more  likely  to  have  this  money  available  to  make 
payments  on  obligations,  to  buy  real  estate  or  make 
investments  than  if  it  had  been  necessary  for  them 
to  save  an  equal  amount  out  of  their  weekly  wages 
during  the  year." 

E.  D.  Staebuck  and  Company. 

DRY  GOODS  AND  CARPETS.     SARATOGA  SPRINGS,  N.  Y.     1914. 

About  35  employees,  not  including  officers  of  the  com- 
pany, share  in  a  semi-annual  profit  distribution  based 
upon  wages  and  length  of  service.  The  announced  in- 
tention of  the  company  was  to  give  for  the  first  six 
months  of  the  year  a  bonus  of  1%  of  the  total  sales,  dis- 
tributed according  to  salaries,  and  for  the  second  six 
months  a  share  in  the  profits,  not  determined  in  advance, 
but  guaranteed  to  be  not  less  than  1%  of  the  sales.  Only 
those  who  have  been  in  the  company's  employ  six  months 
are  eligible  to  participate.  The  president  of  the  com- 
pany considers  the  plan  a  success. 


126 

Star-Peerless  Wall.  Paper  Mills.  | 

joliet,  ill.    1914.  i 

All  employees  who  have  been  in  the  continuous  em- 
ploy of  the  company  for  a  period  of  twelve  months,  bar- 
ring necessary  and  excusable  absence,  and  barring  thd 
customary  brief  lay-off  during  shut-down  following  sam- 
pling, receive  a  sum  of  money  equivalent  to  1  per  cent 
of  the  total  amount  paid  them  in  compensation  during 
the  period  named  for  each  year  of  service  with  the  com- 
pany. That  is  to  say,  an  employee  of  one  year's  service 
would  receive  1%  of  his  year's  wages,  one  of  two  years* 
service  2%,  and  so  on  until  a  maximum  of  10%  for  ten 
years  or  more  of  service  is  reached. 

All  factory  employees  are  included  in  the  plan;  but 
not  salesmen,  their  compensation  being  based  upon  re- 
sults secured. 

Questions  which  may  from  time  to  time  arise,  such  as 
reasonableness  of  an  excuse  for  absence,  length  of  time 
in  service,  etc.,  are  submitted  to  a  board  of  arbitration, 
composed  of  three  members,  one  from  the  office,  one 
from  the  superintendents,  and  one  from  the  mill. 

In  outlining  the  plan  to  its  employees  the  company 
said: 

"It  is  an  established  fact  that  a  spirit  of  hearty 
cooperation  between  employer  and  employee  is  pro- 
ductive of  the  best  results  in  any  business,  not  only 
to  the  employer,  but  to  the  employee  as  well,  for  the 
success  of  the  employee  is  as  certainlj^  dependent  on 
the  success  of  the  enterprise,  as  is  the  success  of  the 
employer. 

"The  cost  of  this  reward  of  merit  to  the  company 
will  be  a  very  considerable  amount  of  money.  The 
ability  of  the  company  to  give  you  this  money  is 
dependent  upon  a  maintenance  of  the  success  which 
it  is  at  present  achieving.  Should  this  success  di- 
minish, the  expenditure  of  this  sum  might  be  a  hard- 
ship upon  the  company.  For  this  reason  we  reserve 
the  privilege  of  amending  or  entirely  withdrawing 
the  proposition,  if  circumstances  at  any  time,  in  our 
judgment,  render  it  advisable  to  do  so." 


127 

The  Star  Pin  Company, 
shelton,  conn.    1916. 

In  honor  of  its  fiftieth  birthday,  the  company  which 
employs  something  like  500  hands  paid  a  bonus  of  ten 
per  cent  to  all  who  have  worked  for  the  company  for  ten 

years  or  more.  Bridgeport  (Conn.)  Telegram,  Feb.  25,  1916 

Paul.  Steketee  &  Sons. 
wholesale  dry  goods.    grand  rapids,  mich.    1903. 

A  cash  bonus  is  distributed  to  all  employees  who 
have  been  employed  for  5  years  continuously  after  tak- 
ing the  annual  inventory.  The  amount  of  bonus  is  based 
on  the  actual  salary  they  have  received  during  the  pre- 
ceding year.  The  percentage  is  optional,  depending  on 
the  profits  made.  The  minimum  amount  paid  thus  far 
is  5%,  and  the  maximum  amount  10%.  Every  employee 
is  included  in  the  plan.  Average  number  of  employees 
is  220 — of  these  78  received  a  10%  bonus  on  January  20, 
1916,  for  the  year  1915. 

The  company  reports: 

' '  We  are  not  entirely  satisfied.  We  would  like  to 
find  a  satisfactory  plan  to  reward  efficiency  and 
merit,  as  well  as  faithfulness.  Our  present  one  is 
not  comprehensive  enough  and  it  permits  many  to 
have  a  bonus  who  are  not  really  entitled  to  reward 
as  much  as  others  who  are  not  included  in  our  pres- 
ent plan.  We  heartily  believe  in  the  profit-sharing 
plan  in  which  all  who  are  entitled  to  it  have  a  fair 
chance. ' ' 

John  B.  Stetson  Company, 
hat  manufacturers.    philadelphia,  pa.    1898. 

The  company  has  in  effect  several  plans  in  the  nature 
of  extra  compensation  above  regular  wages.  The  plans 
have  been  changed  somewhat  from  time  to  time  to  meet 
the  special  conditions  of  different  departments,  but  in 
general  they  may  be  classified  under  three  heads — a 
Christmas  distribution,  a  bonus  for  continuous  services, 


128 

and  a  stock  allotment  plan.  The  Christmas  gifts  are 
made  on  the  basis  of  the  year's  record  of  the  employees, 
and  consist  of  cash,  commodities,  building  association 
stock,  life  insurance  policies  and  common  stock  of  the 
company. 

The  bonus  for  continuous  service  was  originally  5% 
on  annual  wages  for  employees,  in  one  department,  who 
remained  with  the  company  a  full  year,  but  for  the  past 
eight  years  it  has  been  20%  and  applies  to  nearly  all 
departments.  During  the  first  year  of  this  plan  about 
30%  of  the  employees  in  the  department  affected  worked 
steadily  through  the  year,  while  during  the  past  seven 
years  practically  all  the  employees  of  the  department, 
numbering  1,000,  have  earned  the  20%  bonus.  The  com- 
pany states  that  this  bonus  has  in  no  way  affected  the 
regular  wages,  which  have  been  increased  more  than 
once  since  the  beginning  of  the  bonus  system. 

Since  1902  an  annual  allotment  of  stock  has  been 
made  to  deserving  employees,  at  the  discretion  of  the 
president.  For  this  purpose  5,000  shares  were  set  aside 
in  charge  of  five  trustees.  Any  stock  allotted  to  an  em- 
ployee is  held  by  these  trustees  for  fifteen  years  before 
final  delivery.  No  payments  towards  its  purchase  are  re- 
quired of  the  employee,  but  the  stock  is  credited  with  all 
dividends  declared,  less  5%  per  annum  on  the  unpaid 
balances  from  year  to  year.  The  stock  being  allotted  at 
par  and  the  dividends  being  now  at  the  rate  of  25%,  the 
stock  is  fully  paid  for  in  about  five  years  and  thereafter 
the  employee  receives  the  full  benefit  of  the  annual  divi- 
dends. If  an  employee  so  desires  he  may  withdraw,  for 
his  personal  use,  one-third  or  less  of  the  dividends  apply- 
ing to  his  stock  in  any  one  year  instead  of  having  the 
full  amount  credited  towards  its  purchase. 

Employees  to  whom  stock  is  allotted  are  required  to 
sign  an  agreement  in  which  all  the  terms  and  conditions 
of  the  plan  are  set  forth.  The  company  reserves  the  ab- 
solute power  to  discharge  an  employee,  with  termination 
of  all  his  rights  under  the  agreement,  except  that  he  is 


129 

paid  in  cash  and  not  in  stock  the  amount  to  his  credit  on 
the  company's  books.  Where  employment  is  terminated 
by  physical  or  mental  inability  of  an  employee  to  per- 
form his  duties,  however,  the  stock  or  cash  held  by  the 
trustees  to  his  credit  is  delivered  to  him,  or  in  case  of  the 
death  of  an  employee  it  is  delivered  to  his  personal 
representatives. 

The  stock  has  now  a  market  value  of  about  $400.  per 
share  and  the  total  allotment  to  employees  thus  far  is 
worth  approximately  $2,000,000.  There  are  upwards  of 
4,000  employees,  of  whom  about  800  have  been  allotted 
stock  under  this  plan.* 

Samuel  Stevens  Company, 
wholesale  grocers.   columbus,  ohio.   1912. 

A  percentage  of  annual  wages,  equal  to  the  rate  of 
dividend  on  common  stock,  is  paid  at  the  end  of  the  year 
to  employees  who  have  been  in  the  service  of  the  com- 
pany continuously  for  twelve  months.  There  are  about 
38  employees,  of  whom  20  participate  at  present.  All 
employees  of  a  year's  standing  are  eligible,  except  the 
office  and  sales  force.  Employees  who  resign  or  are  dis- 
charged forfeit  all  claim  to  a  profit-sharing  dividend  on 
the  wages  earned  during  the  year  in  which  they  leave. 
In  case  of  death  of  an  employee,  his  estate  receives  the 
same  percentage  on  the  wages  earned  by  him  during  the 
year  as  he  received  on  his  wages  for  the  preceding  year. 
The  treasurer  of  the  company  says : 

'*We  adopted  the  plan  with  the  view  to  increasing 
the  efficiency  of  our  force  by  eliminating  frequent 
changes  and  inducing  greater  interest  in  the  busi- 
ness by  prompt  deliveries  and  caring  for  stock,  and 
we  have  found  the  results  very  satisfactory. 


)> 


♦Considerable  publicity  has  been  given  to  a  strike  affecting  one 
department  only  of  this  company  (March,  1916).  Interest  was  keen 
because  some  of  the  men  were  stockowners.  The  impression  that  the 
dispute  was  due  to  the  discharge  of  a  man  who  tried  to  organize  the 
employees  is  erroneous.  Also  It  had  no  relation  to  the  profit  sharing 
plan. 


130 

?:•  Three-In-One  Oil  Company. 

rahway,  n.  j.   1904. 

A  profit-sharing  bonus  is  paid  to  employees  each  year 
based  on  their  individual  annual  earnings.  In  some  years 
5%  has  been  paid;  in  others  6%.  Beginning  with  1913, 
an  additional  distribution  of  4%  has  been  made  to  those 
who  have  been  with  the  company  five  years  or  more. 

Tracy  Loan  and  Trust  Company, 
salt  lake  city,  utah.    1902. 

A  cash  distribution  is  made  at  end  of  each  year,  ac- 
cording as  each  employee,  in  the  opinion  of  the  president, 
promotes  the  growth  and  development  of  the  business  and 
renders  efficient  service  at  each  individual  desk,  and  re- 
lieves and  assists  his  or  her  superiors.  The  president 
keeps  a  record  covering  every  three  months  throughout 
the  year  of  the  percentage  of  merits  and  demerits  of  each 
employee,  '  *  and  no  employee  knows  when  he  receives  his 
check  whether  he  is  to  receive  one  dollar  or  several  hun- 
dred dollars." 

The  annual  cash  distributions  have  increased  yearly 
from  $500  in  1902  to  $6,115  in  1913,  and  have  been  made 
in  addition  to  a  salary  increase  for  every  employee  during 
that  period.    There  are  about  25  employees. 

The  president  of  the  company  considers  the  plan  an 
unqualified  success. 

Tweedy  Silk  Mills,  Inc. 

DANBURY,  CONN.     1914. 

A  share  in  the  profits,  not  determined  in  advance  but 
varying  according  to  net  earnings  from  year  to  year,  is 
distributed  among  the  employees  in  proportion  to  their 
annual  wages.  The  rate  of  ihis  dividend  on  wages  has 
been  10%  during  the  two  years  since  the  plan  was  put  in 
operation.  The  distribution  affects  all  employees,  in- 
cluding heads  of  departments. 


131 

United  States  Steel  Corporation. 

(See  stock  Ownership  Plans) 

Samuel  Valentine  Company, 
shenandoah,  pa.    1916. 

A  bonus  of  five  per  cent  on  earnings  is  to  be  paid 
to  all  employees  provided  they  have  been  in  constant 
employment  six  months  or  more.  The  bonus  will  be  paid 
about  Christmas  time.  The  notice  will  go  into  effect 
February  28. 

Shenandoah  (Pa.)  Herald,  Feb.  25,  1916. 

Vulcan  Plow  Company. 

EVANSVILLE,    IND.      1908. 

All  factory  foremen  and  workmen  who  have  been  em- 
ployed for  more  than  six  months  participate  in  a  bonus 
distribution  in  amounts  ranging  from  $10.00  to  $100.00. 

The  average  number  employed  is  125  men,  who  re- 
ceive an  average  of  $45.00  each  per  year.  The  distribu- 
tion is  in  cash  by  check  and  is  based  on  wages  received, 
length  of  service,  and  general  efficiency. 

Executives,  office  employees  and  salesmen  do  not  as  a 
rule  participate  in  the  annual  bonus  distribution,  but  re- 
ceive increases  in  salary,  as  business  conditions  warrant. 

The  company  states  that  the  plan  has  proved  quite 
satisfactory  to  employees  and  to  it.  There  is  fostered 
a  spirit  of  loyalty,  good  will  and  cooperation  that  is 
highly  desirable.  No  change  in  the  plan  is  contemplated. 

Washburn-Crosby  Company. 

FLOUR  millers.     MINNEAPOLIS,  MINN.     1914. 

The  company  gives  those  employees  who  have  been  in 
its  service  for  one  year  a  check  for  $25  to  start  an  ac- 
count in  a  savings  bank.  At  the  end  of  the  following 
year  the  company  gives  a  check  not  exceeding  $25, 
equivalent  to  half  the  net  increase  in  the  employee 's  bank 
balance  in  excess  of  the  original  $25. 

About  625  men  were  eligible  when  the  plan  was  intro- 
duced, and  the  company  states  that  '*a  great  many  men 


132 

started  savings  accounts  with  the  $25  and  have  continued 
to  put  additional  funds  in  the  bank  since  receiving  the 
special  checks.  .  .  .  Our  whole  desire  is  to  encour- 
age in  a  substantial  manner  those  men  who  are  efficient, 
loyal,  responsible,  and  by  their  good  work  help  to  build 
our  company  along  honorable,  fair-minded  and  straight- 
forward lines." 

Weinstock,  Lubin  &  Co. 

MERCANTILE   ESTABLISHMENT.      SACRAMENTO,   CAL, 

During  the  past  twenty-five  years  or  more  the  buyers 
or  heads  of  departments  in  this  store  have  been  paid  a 
dividend  out  of  the  net  earnings  of  their  several  depart- 
ments. It  is  based  wholly  upon  the  net  profits  of  the  de- 
partment and  not  upon  wages  or  length  of  service.  The 
company  considers  it  a  successful  method  for  enlisting 
the  best  efforts  of  the  department  heads,  of  whom  there 
are  about  twenty. 

Wells  Brothers  Company. 

manufacturers'  dies  and  screw  cutting  machinery. 

greenfield,  mass. 

In  the  company's  plant  there  is  an  organization  known 
as  the  ''Old  Guard",  composed  of  all  employees  who 
have  been  with  the  concern  continuously  for  ten  years 
or  more.  They  receive  a  yearly  bonus,  the  amount  of 
which  is  based  upon  length  of  service  and  without  re- 
gard to  regular  remuneration. 

Western  Wheeled  Scraper  Company, 
aurora,  ill.    1911. 

It  is  the  policy  of  the  company,  when  it  has  a  prosper- 
ous year,  earning  a  fair  dividend  for  the  stockholders,  to 
make  a  distribution  among  all  the  employees  who  have 
been  on  the  pay  roll  for  a  year  or  more,  from  the  presi- 
dent down  to  the  least  important  laborer,  aggregating 
about  850  employees. 


133 

Three  per  cent  on  the  annual  salary  of  each  employee 
was  paid  during  the  years  1911,  1912  and  1913.  No  dis- 
tribution was  made  in  1914. 

The  company  states:  "We  believe  this  distribution 
has  helped  to  keep  our  employees  on  the  roll  permanently 
and  prevented  the  frequent  transfers  of  people  among 
different  manufacturers  in  this  territory.  Our  employees 
are  able  to  judge  whether  the  volume  of  business  is  suffi- 
cient to  earn  dividends  for  the  stockholders  so  that  there 
was  apparently  no  ill  feeling  when  we  were  obliged  to 
omit  the  distribution  in  1914  and  do  not  expect  that  there 
will  be  this  year  (1915).  On  the  whole,  we  are  quite  well 
satisfied  with  the  results  of  this  plan  up  to  this  time." 

Williams  Foundry  and  Machine  Company, 
akron,  ohio.   1912. 

An  appropriation  is  made  each  year  for  the  purpose 
of  paying  a  bonus  to  the  employees.  It  is  not  a  fixed 
percentage  of  the  profits  but  a  sum  determined  by  the 
management  according  to  what  it  believes  can  be  afforded. 
At  the  last  distribution  in  1915,  the  sum  of  $2,200  was 
divided,  partly  to  those  who  had  been  with  the  company 
more  than  thirteen  months,  in  proportion  to  length  of 
service,  and  partly  according  to  the  number  of  hours 
worked  during  the  preceding  year,  irrespective  of  earn- 
ings. Salaried  foremen  did  not  share  in  this  distribution, 
but  in  1915  they  were  given  a  cash  present  of  $40  each. 

Wolverine  Copper  Mining  Company. 

Mohawk  Mining  Company. 

kearsage,  mich.    1915. 

In  July,  1915,  the  companies  paid  their  employees,  to 
the  number  of  about  1,100,  a  cash  bonus  of  5  per  cent  on 
their  June  wages,  and  announced  unofficially  that  this 
distribution  would  continue  monthly  so  long  as  copper 
remained  above  a  certain  price.  In  February,  1916,  the 
bonus  was  increased  to  10%. 


134 

The  general  manager  states  that  the  plan  has  met  with 
considerable  unexpected  favorable  comment  and  bids  fair 
to  be  successful,  particularly  when  market  conditions  are 
uncertain. 

Yale  and  Towne  Manufacturing  Company, 
hardware.  stamford,  conn. 

A  limited  number  of  those  holding  responsible  posi- 
tions in  the  organization  for  a  number  of  years  received, 
in  addition  to  their  stated  salaries,  a  certain  share  of  the 
profits  in  excess  of  interest  on  invested  capital. 

This  plan,  although  regarded  as  a  success,  was  dis- 
continued because  it  was  concluded  that  it  would  be  bet- 
ter to  have  those  men  acquire  stock  holdings  in  the  com- 
pany, and  this  investment  arrangement  was  put  into  op- 
eration in  1914.  The  stock  is  offered  to  them  below  the 
market  price.  This  is  regarded  as  a  wise  means  of  in- 
teresting more  deeply  in  their  work,  the  heads  of  departr 
ments,  to  whom  it  is  limited,  not  only  for  their  own 
selfish  ends  but  because  it  will  bring  about  better  results 
for  the  corporation  as  an  entity. 

Many  years  ago,  the  company  adopted  a  system  called 
by  it  ''Gain  Sharing",  under  which  certain  groups  of 
employees  participated  in  the  reduction  of  costs  as  they 
were  effected  (described  in  paper  by  Henry  R.  Towne, 
the  President,  on  ''Gain  Sharing",  in  Vol.  X  of  the  pro- 
ceedings of  the  American  Society  of  Mechanical  Engi- 
neers, 1889).  The  plan  was  used  successfully  for  several 
years  but  was  replaced  by  methods  of  piece-work  or  the 
"Taylor  System"  of  scientific  management,  under  which 
the  workmen  were  rewarded  for  increased  efficiency  by 
increased  compensation,  according  to  the  company's 
statement. 

On  March  3,  1918,  the  company  announced  that  more 
than  $35,000  would  be  paid  to  the  workmen  in  bonuses 
March  15,  and  a  similar  distribution  in  April.  There  are 
5,500  employees  at  the  local  plant,  to  be  affected  by  this 
distribution.    This  has  no  connection  with  the   "Taylor 


135 

System"   of   paj^ment   but   is  a  gratuity  or  gift  due  to 
unusual  conditions  in  the  labor  market. 

COOPERATIVE  PURCHASING  PLANS. 

There  are,  in  addition  to  the  above  described  forms 
of  special  distribution,  a  number  of  schemes  which  pro- 
vide in  one  form  or  another  for  the  purchase  of  supplies 
by  employees,  either  at  cost  or  at  a  discount,  the  net  re- 
sult being  equivalent  to  an  addition  to  wages,  so  far  at 
least  as  the  employee  is  concerned.  Two  enterprises  of 
this  character  of  especial  interest  are  the  following: 

Philadelphia  Rapid  Transit  Company, 
philadelphia,  pa. 

This  corporation  promoted  the  organization  of  an  em- 
ployees' Cooperative  Beneficial  Association  having  a 
variety  of  functions,  one  of  which  is  to  enable  the  mem-, 
bers,  through  a  cash  coupon  system,  to  purchase  goods 
at  a  discount  of  8%  granted  by  more  than  one  hundred 
merchants  of  the  city.  Of  the  10,000  employees  of  the 
company,  about  8,000  are  members  of  the  association  and 
the  joint  purchases  exceed  $4,000,000  per  annum. 

The  chairman  of  the  company,  in  an  address  to  the 
association  members  in  1912,  when  this  plan  was  started, 
acknowledged  that  the  wages  paid  were  low  but  expressed 
the  belief  that  through  the  operation  of  a  new  wages  fund 
plan,  they  would  be  made  higher  than  elsewhere.  Two 
years  later,  it  was  stated  on  behalf  of  the  company  that 
the  maximum  wage  to  motormen  and  conductors  had  been 
increased  from  23  to  30  cents  per  hour  and  that  nearly 
one-half  of  the  employees  were  receiving  the  maximum 
rate. 

Vermont  Marble  Company. 

proctor,  vt. 

This  is  another  plan  of  economical  purchasing,  unique 
in  character,  and  dating  from  the  year  1903.     All  the 


136 

profits  of  the  so-called  ** cooperative  stores"  maintained 
by  this  company,  over  and  above  rental  of  buildings  and 
4%  on  the  capital  invested,  are  distributed  annually  in 
cash  to  such  employees  of  the  company  as  are  customers 
of  the  stores  in  proportion  to  the  amount  of  their  pur- 
chases. 

This  in  effect  amounts  to  selling  the  goods  to  em- 
ployees at  cost,  and  to  that  extent  constitutes  a  gratuity 
to  such  employees  as  may  consider  it  advantageous  to 
avail  themselves  of  the  opportunity  in  preference  to 
trading  at  other  stores. 

It  is  stated  that  the  only  criticism  of  the  plan  has 
arisen  from  the  fact  that  the  dividend  is  less  in  some 
years  than  in  others,  which  is  not  always  understood  by 
those  who  do  not  take  into  consideration  the  changes  in 
business  and  market  conditions.  The  company  has  about 
3,000  employees  and  the  distribution  or  rebate  in  at  least 
one  year  has  been  as  high  as  $36,000. 

STOCK  OWNERSHIP   PLANS. 

Plans  for  interesting  workingmen  in  the  ownership 
of  stock  in  the  company  by  which  they  are  employed  are 
of  several  types.  In  some  cases,  the  corporation  offers 
its  stock  to  employees  at  less  than  the  current  market 
price  and  accepts  payment  on  the  instalment  plan,  charg- 
ing interest  on  the  unpaid  balances  and  crediting  divi- 
dends towards  the  purchase  account. 

In  others,  following  out  the  same  idea,  there  is  given 
in  addition  a  bonus  in  consideration  of  not  disposing  of 
the  stock  or  leaving  the  service  of  the  company  for  a 
given  term  of  years. 

In  still  other  instances,  stock  ownership  is  accom- 
plished in  part  by  payments  made  by  the  employees  and 
in  part  by  special  credits  allowed  by  the  company  to- 
wards the  purchase  of  the  stock;  and  in  some  cases  the 
employees  pay  nothing,  the  stock  being  credited  to  their 
accounts  and  held  for  a  term  of  years,  when  it  is  given  to 
them  outright. 


137 

Close  analysis  of  a  few  stock  ownership  plans,  com- 
monly referred  to  as  forms  of  profit  sharing,  reveals  no 
actual  profit  distribution  or  expense  on  the  part  of  the 
company,  other  than  is  involved  in  the  bookkeeping  ar- 
rangements for  the  receipt  and  crediting  of  partial  pay- 
ments. 

Types  of  each  of  these  plans  will  be  found  among 
the  following  analysis: 

American  Light  &  Traction  Company. 

See  Chapter  on  Percentage  of  Profits. 

American  Telephone  &  Telegraph  Company. 
new  york  city.   1915. 

Shares  of  stock  of  the  company  are  sold  at  $110  per 
share  to  any  employee  who  has  been  for  two  years  in  the 
service  of  the  company,  or  of  any  subsidiary  company 
which  accepts  the  plan.  Employees  may  purchase  one 
share  for  each  $300  of  wages,  but  in  no  case  may  they 
purchase  more  than  ten  shares.  Payments  must  be  made 
at  the  rate  of  $2  per  share  per  month,  which  is  deducted 
from  wages.  Interest  at  4%)  is  charged  on  unpaid  bal- 
ances, while  the  dividends  (which  have  averaged  8%)  are 
credited  as  payments  on  the  stock.  No  employee  may 
alienate  or  pledge  his  stock  until  it  is  fully  paid  for. 

If  he  leaves  the  company's  employ  his  purchase-agree- 
ment is  cancelled  and  the  net  amount  paid  in  is  returned ; 
provided,  that  if  he  leaves  after  March  1,  1917,  he  may, 
if  he  chooses,  pay  the  balance  due  on  his  stock  and  take 
it  up.  The  same  course  is  followed  with  respect  to  the 
heirs  of  employees  who  die  in  the  company's  service. 

Over  30,000  employees  have  purchased  and  are  paying 
for  more  than  100,000  shares  of  stock. 

Atlas  Powder  Co. 

See  Special  Distributions. 


138 

Baker  Manufacturing  Company. 

windmills.  pumps,  cylinders,  tanks,  gasoline  engines, 
feed  grinders,  pump  jacks.    evansville,  wis.    1899. 

The  net  profits  of  the  company,  after  certain  specified 
payments  are  made  therefrom,  are  divided  between  the 
Preferred  Stock  and  the  "honorary"  emjjloyees  in  the 
proportion  that  5%  on  said  stock  bears  to  the  wages  of 
the  employees.  The  "honorary"  employees  are  those 
who  have  been  in  the  service  of  the  company  4500  hours 
during  100  consecutive  weeks.  They  are  supposed  to  re- 
ceive the  prevailing  rates  of  wages  as  a  partial  remunera- 
tion, and  the  extra  payment  out  of  profits  is  termed  the 
"remaining  wage". 

The  sum  available  for  this  extra  payment  to  Preferred 
Stock  and  honorary  employees  is  whatever  remains  of 
the  net  profits  after  a  57o  dividend  has  been  paid  on  both 
Preferred  and  Common  Stock,  $5  paid  into  a  stock  pur- 
chasing fund  for  every  share  of  stock  on  deposit  with 
the  company,  and  10%  of  the  balance  added  to  the  sink- 
ing fund.  The  company  agrees  to  purchase  an  employee 's 
stock  whenever  the  owner  requests  it  if  there  is  money 
in  the  stock  purchasing  fund  to  purchase  with.  The  dis- 
tribution to  employees  is  90%  in  Common  Stock  and  10% 
in  cash.  The  company  requires  all  employees  to  deposit 
their  Common  Stock  with  it,  giving  the  company  the  first 
opportunity  of  purchasing  should  they  want  to  sell,  as 
well  as  the  right  to  purchase  the  stock  at  the  market 
price  if  the  owner  enters  the  employ  of  a  competitor. 

The  president  of  the  company  states:  "In  establish- 
ing profit  sharing,  it  was  our  idea  first  to  return  to  cap- 
ital substantially  the  same  earnings  that  past  experience 
had  shown  it  could  earn,  and  to  offer  to  employees  the 
increase  in  earnings  that  they  could  effect. 

"A  10%  increase  in  the  output  of  employees  is  more 
than  a  10%  increased  earning,  as  the  fixed  charge  does 
not  increase  in  proportion  to  the  output  of  the  em- 
ployees. An  employee  who  is  using  his  head  to  increase 
his  production  in  every  way  possible,  as  a  rule,  requires 


139 

little  or  no  additional  room  to  work  in  and  less  of  a  fore- 
man's time.  In  other  words,  an  employee  who  is  inter- 
ested, is  producing  more  with  less  overhead  and  he  brings 
the  overhead  percentage  down.  This  results  in  a  larger 
increase  in  earning  than  in  actual  production. 

''Another  point  in  favor  of  profit  sharing  is  that  it 
makes  capital  much  more  secure.  It  is  an  almost  posi- 
tive preventive  of  strikes.  It  increases  the  length  of 
time  that  a  man  will  stay  in  your  employ  and,  as  a  rule, 
his  efficiency  increases  with  his  years  of  service,  and  it 
certainly  lessens  the  ill-will  between  the  management  and 
employees  and  between  the  foremen  and  employees. 

* '  Of  course,  we  do  not  regard  our  plan  as  unqualifiedly 
a  success  but  it  has  operated,  in  most  respects,  satis- 
f  actorilv. " 

In  May  1914  the  company  employed  119  men,  70%  of 
whom  are  stockholders.  During  the  past  sixteen  years 
the  company  states  that  the  plan  has  resulted  in  adding 
from  28%  to  120%  to  the  wages  of  the  stockholding  em- 
ployees. 

Belle  City  Malleable  Iron.  Company.  '  '1 

f 

RACINE,  WIS.     1913. 

This  is  a  stock  participation  plan,  introduced  very 
largely  with  the  motive  of  encouraging  thrift  among  the 
employees.  It  applies  to  heads  of  departments  and  the 
rank  and  file.  Within  ten  days  of  the  original  offer, 
$60,000  worth  of  Preferred  Stock  had  been  subscribed 
for,  or  about  double  the  amount  the  company  had  ex- 
pected would  be  taken  up  within  the  first  three  months. 
Nearly  one-third  of  the  employees  joined  in  the  subscrip- 
tion and  among  these  were  about  one-fourth  of  all  the 
Hungarians  and  Italians,  respectively,  in  the  company's 
employ.  A  representative  of  the  company  makes  the 
comment:  *'It  made  quite  a  difference  in  one's  feeling 
in  going  through  the  plant  to  know  that  every  third  man 
had  an  interest  as  a  stockholder  in  the  company,  in  addi- 
tion to  his  daily  wage." 


140 

The  company  agreed  to  pay  employees  who  took  thi3 
6%  stock  an  extra  2%  dividend  on  the  stock  subscribed 
for,  during  a  period  of  five  years.  Payment  was  made 
for  the  stock  at  the  rate  of  $1.50  per  month  per  share 
and  interest  charged  on  deferred  payments  at  the  rate 
of  5%,  so  that  the  stock  received  a  net  credit  of  S%  per 
annum  during  the  five  years. 

The  $1.50  per  month,  plus  the  dividends  and  extra 
credit  over  the  interest  rate,  would  pay  for  the  stock  in 
a  little  less  than  five  years.  Employees  who  resign  are 
not  required  to  sell  their  stock  bade  to  the  company  and 
the  plan  is  practically  without  coercive  reservations. 
Such  reservations,  in  the  opinion  of  the  same  represen- 
tative, "frequently  seem  to  vitiate  a  great  deal  of  the 
good  that  such  a  plan  is  capable  of  developing  in  the 
men. '  * 

This  representative  states  further  that  he  has  talked 
with  more  than  forty  different  railroad  employees,  all 
union  men,  and,  with  one  exception,  "all  were  of  the 
opinion  that  such  a  plan  as  has  been  put  into  operation 
by  the  Belle  City  Malleable  Iron  Co.  would  provide  an 
opportunity  for  the  men  to  place  their  savings  in  the 
business  in  which  they  are  working  and  with  which  they 
are  familiar  and  would  prove  an  incentive  for  them  to 
save."  One  street  car  conductor  is  quoted  to  the  effect 
that  "so  many  of  the  men,  immediately  after  pay  day, 
spend  their  money  for  drink  and  if  something  could  be 
done  to  interest  them  in  saving  and  applying  against  the 
purchase  of  stock,  it  would  be  a  great  benefit  to  them 
and  their  families." 

The  company  regards  the  plan  as  entirely  successful. 

Blount  Plow  Company. 

See  Special  Distributions. 

Boston  Consolidated  Gas  Company. 
See  Percentage  of  Profits. 

J.  Gr.  Brill  Company. 

See  Special  Distributions. 


141 

Commonwealth  Edison  Company, 
chicago,  ill. 

Any  employee  who  has  been  in  the  service  of  the  com- 
pany for  one  year  may  make  subscriptions  of  S^o  or 
5%  of  his  salary  to  a  savings  fund,  and  the  amount 
deposited  by  him  will  draw  interest  at  the  rate  of  67© 
compounded.  Payments  must  be  made  within  four  days 
after  each  pay  day.  At  the  end  of  five  years  the  em- 
ployee has  the  option  either  of  taking  out  his  deposits 
with  accrued  interest  or  taking  it  in  the  form  of  stock 
at  $120  per  share. 

The  stock  nearly  always  sells  above  this  figure  and 
almost  invariably  the  employees  take  out  their  savings 
in  this  form.  If  a  subscriber  leaves  the  company's 
service,  or  is  discharged,  or  mshes  to  discontinue  his 
subscription,  the  amount  he  has  paid  in  is  refunded,  with 
interest.  The  Company  reports:  *'We  regard  it  un- 
qualifiedly as  a  success." 

Commonwealth  Power,  Railway  and  Light  Company. 

NEW  YORK  city.     1916. 

On  January  15,  the  company  announced  a  plan  to 
aid  its  employees  to  purchase  Common  Stock  of  the  com- 
pany at  $60  per  share.  The  offer  was  extended  to  all 
employees,  including  heads  of  departments  and  the  rank 
and  file.  The  plan  became  effective  February  1,  and  of 
the  5,500  employees  1,300  have  entered  subscriptions. 

Payments  on  the  stock  are  to  be  made  by  deduction  of 
$1  per  share  per  month  from  the  wages  of  the  sub- 
scribers. Interest  on  unpaid  balances  is  charged  at  the 
rate  of  5%  per  annum,  and  dividends  on  the  stock  are 
credited  to  the  purchase  account.  For  the  past  three 
years  the  dividends  have  been  4%,  and  on  this  basis  the 
monthly  payments  by  the  subscribers  plus  the  dividends 
and  less  the  interest  charges  will  fully  pay  for  the  stock 
in  1920,  at  which  time  the  total  amount  withheld  from 
the  employee's  wages  will  have  been  $49.63  per  share. 
At  the  price  at  which  the  stock  is  offered  to  employees 


142 

the  actual  dividend  yield  is  6%%.  An  employee  may 
subscribe  for  no  more  than  two  shares  for  each  $300  (or 
fraction  thereof)  of  his  annual  wages.  The  stock  is  not 
delivered  to  the  employee  until  fully  paid  for  and  mean- 
while is  not  transferable. 

In  case  of  the  resignation  or  death  of  an  employee, 
settlement  will  be  made  by  delivery  of  as  many  shares 
of  stock  at  $60  per  share  as  the  net  amount  paid  in  and 
accumulated  on  the  account  will  purchase,  with  check 
for  any  balance  remaining. 

Subscribers  may  reduce  their  subscriptions  and  have 
the  net  amounts  paid  in  applied  to  the  purchase  of  shares 
in  full. 

To  assist  employees  in  understanding  the  plan,  tables 
are  included  in  the  announcement  showing  the  amounts 
that  would  be  deducted  from  wages,  the  dividends  to  be 
received,  the  interest  charged,  and  the  equity  acquired 
from  quarter  to  quarter  until  1920  on  the  purchase  of 
from  one  to  twenty  shares  of  stock. 

Gr.   C.   CORNWELL. 
GROCERY  FIRM.     WASHINGTON.  D.  C.     1914. 

A  certain  amount  of  stock  of  the  company  is  alloted  to 
old  and  faithful  employees,  to  show  the  firm's  appreciation 
of  loyal  service.  Double  dividends  are  paid  on  this  stock, 
one  portion  going  direct  to  the  employee  and  the  other 
to  four  trustees  who  credit  it  towards  the  purchase  of  the 
stock.  When  the  stock  is  fully  paid  for  in  this  manner, 
it  is  delivered  to  the  employee.  There  are  about  75  em- 
ployees, white  and  colored,  of  whom  11  at  present  partici- 
pate in  this  distribution.  The  company  considers  that 
the  plan  has  been  successful  from  the  standpoint  of  moral 
effect,  but  that  the  financial  results  have  not  been  as 
great  as  expected. 

Crane  Company. 
See  Special  Distributions. 


143 

1       <       i 

K 

CusHMAN  Baking  Company. 

NEW  YORK  CITY.     1915. 

The  company  is  understood  to  have  set  aside  a  certain 
amount  of  its  common  stock,  which  employees  may  pur- 
chase at  $45  a  share.  Employees  may  subscribe  $25  down 
and  the  balance  in  three  years,  with  interest  at  5%  on 
the  unpaid  balance. 


Thomas  Devlin   Manufacturing   Company,   Incl 

manufacturers  of  malleable  iron  fittings, 
(factory:    burlington,  n.  j.)    philadelphia,  pa.    1905. 

Upon  payment  of  $1.00  a  week,  employees  who  render 
"continued  and  faithful  service"  and  who  earn  $10  per 
week  or  over,  receive  dividends  upon  $500  worth  of  stock 
of  the  company,  for  a  term  of  five  years.  As  soon  as 
the  cash  payments  and  earnings  of  the  stock  amount  to 
$100,  a  certificate  of  stock  is  issued,  covering  such 
amount.  Same  arrangements  are  in  force,  whereby  em- 
ployees who  pay  $2.00  a  week  receive  dividends  on  $1,000 
worth  of  stock.  Some  of  the  employees  own  $3,000  to 
$4,000  worth  of  stock. 

An  official  of  the  company  states  that  the  plant  was 
moved  from  Philadelphia  to  Burlington,  N.  J.,  largely  on 
account  of  troubles  with  the  moulders '  union.  The  stock- 
ownership  plan  established  for  the  new  employees  at 
Burlington  was  offered  to  the  remaining  force  at  Phila- 
delphia, but  the  men  were  suspicious  and  refused  to  ac- 
cept it. 

The  company  reports  that  the  plan  has  worked  very 
successfully  with  a  majority  of  the  employees,  but  that 
in  the  case  of  a  certain  proportion  of  the  employees  very 
poor  results  have  been  accomplished.  When  these  em- 
ployees have  paid  in  $50  or  $60,  they  are  accustomed  to 
leave  the  company  in  order  to  draw  out  what  they  have 
paid  in. 


144 

Du  Pont  de  Nemours  Powdeb  Company. 

WILMINGTON,  DEL. 

An  opportunity  is  given  each  year  to  all  employees 
to  buy  Preferred  Stock  on  the  instalment  plan  a  certain 
agreed  sum  being  deducted  from  the  monthly  salary.  The 
number  of  shares  that  may  be  bought  is  in  proportion 
to  the  amount  of  salaries.  Employees  who  remain  in  the 
service  for  five  years  are  allowed  a  bonus  of  $3.00  a 
year. 

Employees  who  have  done  some  particularly  meritori- 
ous work  are  given  stock,  which  is  held  in  their  names. 
When  the  dividends  on  a  man's  stock  amount  to  the  pur- 
chase price  of  a  share  of  stock  it  is  given  to  him  and  not 
before. 

Since  April,  1915,  a  cash  bonus  of  20%  of  salaries 
has  been  given  at  the  end  of  each  month  to  salaried 
employees  whose  work  is  perfectly  satisfactory  in  every 
respect.  The  company  has  announced  that  this  bonus 
will  be  continued  throughout  1916. 

In  October,  1915,  at  the  time  of  the  change  of  the 
E.  I.  du  Pont  de  Nemours  Powder  Company  to  E.  I. 
du  Pont  de  Nemours  &  Company,  of  Delaware,  with 
$245,000,000  capital,  a  distribution  of  two  thousand 
shares  of  stock  of  the  old  company  was  made  to  the  large 
oflEice  force,  in  reward  for  faithful  service,  the  value  of 
this  stock  being  about  $1,600,000. 

DURANT-DORT    CARRIAGE    COMPANY. 
FLINT,  MICH.     1915. 

Heads  of  departments  are  permitted  to  acquire  stock 
in  the  company  by  giving  a  note  in  payment,  with  the 
stock  as  collateral.  The  note  is  paid  from  the  earnings 
on  the  stock.  Another  method  is  provided  by  setting 
aside  a  certain  amount  of  stock  on  which  dividends  are 
paid,  the  stock  being  delivered  to  the  employee  at  the 
end  of  five  years  if  he  has  remained  in  the  company's 
service  during  that  period. 


145 

To  all  other  employees  a  quarterly  cash  distribution 
is  made,  based  upon  length  of  service.  Between  30  and 
40  of  the  100  employees  are  at  present  entitled  to  par- 
ticipate in  this  distribution. 

The  company  states  that  it  sees  no  reason  why  the 
plan  is  not  a  success,  ''as  it  provides  periodical  revenues 
for  employees  who  have  been  faithful  for  a  term  of 
years. ' ' 

Edison  Electric  Illuminating  Company  of  Brooklyn. 

See  Percentage  of  Profits. 

First  National  Bank  of  Chicago, 
chicago,  ill.    1903. 

For  a  number  of  years,  this  institution  has  had  in 
force  a  plan  under  which  employees  may  purchase  stock 
of  the  bank  within  ten  points  of  the  market  price.  If  de- 
sired, the  money  may  be  borrowed  from  the  bank  at  the 
rate  of  4  per  cent  for  such  purchases  and  repaid  in  in- 
stalments of  $5  a  month  for  each  share. 

The  president,  James  B.  Forgan,  says  in  telegram  of 
March  27,  1916: 

"There  are  now  776  employees,  of  whom  130  are 
availing  themselves  of  the  opportunity.  The  plan 
was  put  in  operation  in  January,  1903,  and  is  limited 
to  members  of  the  bank  pension  fund.  All  clerks 
eighteen  years  and  over,  of  whom  there  are  695,  are 
members.     The  plan  is  a  success." 

Frost  Gear  and  Forge  Company,  and 
General  Electric  Company. 

See  Special  Distributions. 

The  Globe-Wernicke  Company. 

manufacturers  of  bookcases  and  cabinets, 
cincinnati,  ohio. 

The  company  assists  its  most  reliable  employees  in 
the  purchase  of  common  stock  of  the  company. 


146 

The  Goodyeab  Tire  &  Kubber  Company, 
^vkron,  ohio. 

Heads  of  departments  and  branch  and  district  mana- 
gers of  the  company  are  permitted  to  acquire  common 
stock  at  par,  on  the  installment  plan.  The  amount  al- 
lowed to  each  man  is  determined  by  the  management, 
largely  according  to  length  and  merit  of  service.  The 
plan  affects  some  235  employees,  in  a  total  force  of  about 
8,500. 

The  company  states  that  all  employees  who  are  bene- 
fited by  the  opportunity  to  purchase  stock  appreciate  it 
and  ''undoubtedly  the  service  rendered  by  them  is  on 
a  higher  plane  than  it  would  otherwise  be." 

At  times  during  rush  production,  the  company  has 
heretofore  paid  a  5%  bonus  in  some  departments  for 
steady  attendance,  but  it  did  not  find  the  plan  successful 
and  it  has  been  discontinued. 

Great  Northern  Railway  Company, 
st.  paul,  minn.    1900. 

Employees  other  than  day  laborers,  who  have  been  in 
the  service  of  the  company  continuously  for  at  least  three 
years  and  whose  yearly  salaries  or  wages  do  not  exceed 
$3,000,  are  enabled  to  invest  their  savings  with  the  com- 
pany in  the  following  manner : 

A  separate  company  was  formed,  known  as  the  Great 
Northern  Employees'  Investment  Company,  which  sub- 
scribed for  stock  of  the  Great  Northern  Railway  Com- 
pany at  par,  to  the  amount  of  $1,188,000.  Employees 
eligible  under  the  above  conditions  may  subscribe  for 
certificates  in  the  Investment  Company  upon  payments 
of  $10  or  multiples  thereof,  but  not  more  than  $5,000 
worth  may  be  purchased  by  any  one  employee. 

Interest  is  paid  to  the  holders  of  these  certificates  at 
the  same  rate  per  dollar  as  the  dividends  on  Great  North- 
ern Railway  stock  held  by  the  Investment  Company. 
This  dividend  rate  has  been  7  per  cent  for  many  years. 


147 

All  expenses  of  management  of  the  Investment  Com- 
pany are  paid  by  the  Railway  Company.  The  certifi- 
cates are  not  transferable.  The  company  may  demand 
surrender  of  a  certificate  at  any  time  and  will  thereupon 
pay  to  the  holder  its  face  value,  together  with  any  accrued 
dividends  payable  before  the  date  of  redemption  fixed  in 
the  demand  for  surrender.  An  employee  who  has  com- 
pleted his  subscription  for  a  certificate  is  not  permitted  to 
reinvest  until  after  the  expiration  of  three  years.  The 
company  w^ill  refund  upon  ten  days'  notice  the  principal 
of  any  certificate  held  by  an  employee,  together  with  all 
dividends  declared  and  payable  thereon;  but  employees 
who  cash  their  certificates  under  this  privilege  are  not 
permitted  to  subscribe  again,  the  intent  of  the  plan  being 
that  employees  shall  retain  their  holdings  so  long  as  they 
are  in  the  company's  service.  Within  six  years  subscrip- 
tions had  been  received  for  nearly  the  entire  allotment  of 
stock. 

Harsh  and  Edmunds  Shoe  Company, 
milwaukee,  wis.    1914. 

Employees  may  buy  stock  of  the  company  on  the 
instalment  plan,  paying  from  50  cents  a  week  up,  and 
upon  this  stock  they  receive  6%  interest  and  a  graduated 
share  of  the  profits  of  the  business.  The  offer  is  open 
to  all  efficient  employees,  regardless  of  length  of  service. 
The  company  has  between  400  and  500  employees,  more 
than  half  of  whom  have  applied  for  stock  under  this  plan. 
Payments  made  towards  the  purchase  of  stock  may  be 
withdrawn  at  any  time.  The  company  states  that  the 
plan  means  to  the  manufacturer  ''that  he  does  not  see 
his  men  loafing,  tools  are  not  destroyed  and  better  work 
is  turned  out." 

H.  P.  Hood  &  Sons. 

DISTRIBUTORS  AND   PRODUCERS   OF  MILK  AND   DAIRY 
PRODUCTS.     BOSTON,  MASS.     1914. 

A  special  issue  of  $200,000  worth  of  Preferred  Stock 
of  the  company,  paying  7%  dividends,  is  available  for 


148 

pnrchase  by  employees  at  $10  per  share  par  value.  This 
stock  has  voting  power  and  may  be  purchased  by  any 
employee  who  has  been  in  the  service  of  the  company 
for  three  months  or  longer.  The  company  reserves  the 
right  to  repurchase  the  stock  if  any  subscriber  leaves  its 
employ,  and  in  case  of  death  of  an  employee  the  stock 
will  be  redeemed  at  an  advance  of  25  per  cent  above  its 
par  value. 

For  the  past  eight  years  the  company  has  also  main- 
tained a  somewhat  complicated  system  of  bonuses,  based 
upon  the  individual  efficiency  of  employees  as  it  affects 
the  financial  returns  of  the  business. 

Illinois  Centeal  Railroad  Company, 
chicago,  ill.    1893. 

In  response  to  the  expressed  desire  of  many  officers 
and  employees  of  the  Illinois  Central  Eailroad  to  invest 
their  savings  in  stock  of  the  company,  former  President 
Stuyvesant  Fish  in  1893  announced  a  stock  purchasing 
plan  upon  the  following  lines : 

Employees  may  purchase  one  share  of  stock  at  a  time 
and  pay  for  it  in  instalments  of  $5  or  multiples  thereof. 
On  these  payments  interest  is  credited  at  4  per  cent,  and 
when  the  total  credit  of  payments  and  interest  equals  the 
subscription  price  of  the  stock  it  is  issued  to  the  pur- 
chaser, who  may  then,  if  he  wishes,  begin  the  purchase  of 
another  share.  This  stock  is  transferable  and  has  full 
dividend  and  voting  rights. 

On  the  first  of  each  month,  the  company  quotes  to  em- 
ployees the  ''fair  market  price"  at  which  applications 
for  purchase  of  stock  will  be  accepted  during  that  month. 
If  a  subscriber  makes  no  payments  on  his  stock  for  twelve 
consecutive  months,  no  further  interest  is  allowed  on  his 
account,  but  the  sum  to  his  credit  is  returned  to  him 
upon  application.  Employees  who  desire  to  cancel  their 
subscriptions  before  completion  may  have  their  payments 
returned  with  accrued  interest. 


149 

Subscribers  are  expected  to  make  their  first  payments 
from  the  first  wages  which  may  be  due  them.  They  may 
authorize  the  paymaster  to  retain  from  their  wages 
monthly  instalments  on  the  purchase  of  the  stock.  Em- 
ployees who  leave  the  service  must  either  pay  in  full  for 
the  stock  subscribed  for,  or  accept  in  cash  the  deposits  they 
have  made,  with  accrued  interest.  Employees  who  have 
not  subscribed  on  the  instalment  plan  may,  if  they  prefer, 
purchase  in  any  one  month  one  share  for  cash  outright, 
at  the  price  fixed  for  that  month. 

Three  years  after  the  introduction  of  this  plan,  Presi- 
dent Fish,  in  a  further  explanatory  statement  to  the  em- 
ployees, noted  with  much  gratification  "their  increasing 
desire  thus  to  identify  their  interests  with  those  of  the 
company".  The  plan  is  still  in  effect,  without  modifica- 
tion, as  originally  adopted. 

Inteenational  Harvester  Company, 
chicago,  ill.    1915. 

In  December,  1915,  the  company  announced  a  plan  to 
assist  its  35,000  employees  to  become  stockholders  and 
sharers  in  the  profits.  Under  this  plan,  employees  have 
an  opportunity  to  purchase  profit-sharing  certificates  in 
the  company,  payments  for  which  are  made  in  monthly 
instalments  from  their  salaries.  These  certificates,  it 
is  provided,  may  be  converted  into  stock  at  $3  below 
the  market  value. 

The  profit-sharing  certificates  range  in  denominations 
from  $50  to  $1,000.  To  the  payment  of  every  employee 
taking  advantage  of  the  offer  before  March  1,  1916, 
the  company  offered  to  add  1%  of  his  earnings  annually. 
Over  twenty  thousand  of  the  employees  enrolled.  At 
some  works  more  than  90%  of  the  shop  men  subscribed. 
The  general  average  for  all  plants  is  over  70%.  The 
aggregate  amount  subscribed  is  over  $5,000,000. 

Interest  will  be  paid  at  the  rate  of  5%  per  annum 
on  all  employees'  payments  and  credits  on  their  profit- 
sharing  certificates.    In  addition  to  the  annual  dividends 


150 

on  stock,  the  company  also  will  pay  to  the  employee  an 
amount  equal  to  the  extra  dividend  which  he  would  re- 
ceive upon  his  stock,  if  the  entire  excess  of  the  net  profits 
for  each  year  prior  to  1921,  over  an  amount  equal  to  67© 
of  the  money  invested  in  the  company's  business  during 
the  year,  were  distributed  pro  rata  to  all  holders  of  its 
Common  Stock. 

Provision  is  made  for  postponement  of  payments  in 
case  of  illness  or  unavoidable  lay-off.  Certificates  can 
be  turned  into  cash  at  the  will  of  the  employee.  The  plan 
will  terminate  in  January,  1921. 

The  company  has  been  endeavoring  for  some  time  to 
devise  a  profit-sharing  plan  which  would  reach  and  bene- 
fit the  rank  and  file  of  the  employees  and  not  merely  the 
department  heads  and  foremen.  An  official  of  the  com- 
pany states  that  the  employees  are  eagerly  accepting  the 
new  opportunity  and  that  since  the  plan  was  adopted 
over  60^  of  the  men  in  some  plants  and  over  80%  in 
others  have  already  subscribed.  This  official  says  further 
that  if  the  new  system  ''tends  to  make  the  employees 
thrifty  and  saving  and  accomplishes  nothing  else,  I  be- 
lieve that  it  will  be  worth  all  that  it  costs  the  company; 
but  there  are  many  other  advantages  to  accrue  to  both 
the  employee  and  the  company  through  his  becoming 
associated  as  a  stockholder.  One  of  the  evident  advan- 
tages is  the  independence  of  the  employee  in  being  able 
at  any  time  to  take  his  certificate  of  stock  to  a  bank  and 
borrow  money  at  a  reasonable  rate  of  interest  to  tide 
him  over  some  financial  crisis." 

In  its  monthly  magazine,  "The  Harvester  World, '^ 
the  company  lays  the  new  plan  before  its  employees  in 
a  brief  announcement  of  the  essential  features,  with  an 
invitation  to  "Join  the  Harvester  Family  Profit-Sharing 
Plan." 

In  the  same  number  Cyrus  H.  McCormick,  in  the 
course  of  an  article  entitled  "A  New  Confidence,"  makes 
the  following  comment  upon  the  profit-sharing  plan: 


151 

**A  new  feeling  of  confidence  in  the  future,  owing 
to  our  ability  to  come  safely  through  the  present 
crisis,  has  encouraged  the  directors  to  take  a  step 
which  they  have  long  been  striving  to  accomplish.  A 
new  plan  of  profit  sharing  has  just  been  adopted, 
which  is  intended  to  benefit  all  the  employees  whose 
incomes  are  the  smallest  and  who  have  not  before 
participated  in  our  profit-sharing  fund.  The  com- 
pany is  glad  to  announce  the  new  plan,  the  details 
of  which  have  just  been  given  out,  and  hopes  it  will 
be  received  with  favor  by  all  the  employees.  This 
is  a  further  evidence  that  the  directors  wish  the  em- 
ployees to  know  that  this  business  is  their  business, 
and  that  the  company's  interests  and  theirs  are 
closely  linked  together." 

The  disposition  to  award  *' extra  payments  to  labor" 
has  been  prominent  throughout  the  history  of  this  com- 
pany. In  1903,  at  the  time  of  the  merger  of  the  McCormick 
Harvesting  Machine  Company  in  the  new  International 
Harvester  Company,  the  members  of  the  McCormick  fam- 
ily made  a  special  distribution  to  employees  who  had 
been  in  the  company's  service  during  the  preceding  five 
years,  amounting  to  5%  of  the  total  salaries  or  wages 
they  had  received  during  that  period.  The  distribution 
was  in  the  form  of  stock  of  the  International  Harvester 
Company,  held  in  trust  for  five  years,  with  certificates 
of  participation  issued  to  the  employees  affected.  The 
holders  of  these  certificates  were  entitled  to  all  dividends 
on  the  stock  and  they  might  at  any  time  surrender  their 
certificates  and  receive  cash  for  the  stock  it  represented, 
at  par.  In  this  manner,  14,109  shares  of  a  par  value  of 
$1,410,900  were  distributed  to  1,501  employees,  besides 
47  who  elected  instead  to  take  life  pensions  offered  by 
the  company  to  those  over  sixty  years  of  age. 

In  1909  the  International  Harvester  Company  an- 
nounced a  profit-sharing  plan,  a  part  of  which  was  a  cash 
bonus  distributed  at  the  company's  discretion  among 
employees  who  made  a  satisfactory  showing  for  the  year, 
the  other  part  being  a  stock  subscription  plan. 


152 

The  bonus  was  based,  in  the  sales  department,  upon 
increase  of  sales  and  reduction  of  selling  expense;  and 
in  the  factory  organization,  it  was  based  upon  increased 
production  and  decreased  cost,  or  a  combination  of  both. 
In  1911,  a  representative  of  the  company  stated  that  the 
bonus  system  had  not  extended  far  beyond  the  grade  of 
assistant  foreman  and  that  all  the  superintendents  were 
interested  in  the  adoption  of  a  system  which  would  reach 
every  employee.  The  newly  adopted  plan,  therefore,  is 
the  outgrowth  of  several  years  of  careful  study  on  the 
part  of  the  management. 

The  stock  subscription  feature  of  1909  allowed  the 
purchase  of  company  stock  by  employees  on  an  instal- 
ment plan.  The  amount  any  employee  might  subscribe 
for  was  limited  to  the  amount  of  his  annual  salary,  and 
the  payments  thereon  were  not  to  exceed  25%  of  his  sal- 
ary in  any  one  year.  Twelve  thousand,  five  hundred 
shares  of  Preferred  Stock  and  fifteen  thousand  shares  of 
Common  Stock  were  offered  for  sale  at  less  than  the  cur- 
rent market  price.  Employees  who  remained  in  the  com- 
pany's service  and  in  good  standing  for  five  years  and 
retained  their  stock  or  interest  in  it  were  allowed  a  bonus 
of  $4  and  $3,  respectively,  on  every  share  of  the  Pre^ 
ferred  and  Common  Stock  for  each  of  the  five  years. 
When  men  left  the  company's  service  or  discontinued 
paying  for  stock,  the  company  continued  crediting  these 
$4  and  $3  payments  to  a  fund  which  at  the  end  of  five 
years  was  to  be  divided  among  such  employees  as  had 
fully  paid  for  their  stock  and  remained  in  good  standing 
in  the  service  throughout  that  period.  This  plan  was  not 
renewed  upon  expiration,  but  it  has  been  replaced  by  the 
new  system  announced  in  December,  1915. 

Intebnational  Nickel  Company. 

NEW  YORK.     1914. 

Employees  are  allowed  to  purchase  stock  of  the  com- 
pany at  $110  per  share  by  making  monthly  payments  of 


153 

not  less  than  $3.00  per  share,  which  are  deducted  from 
wages  or  salaries.  Payments  on  stock  are  not  to  exceed 
25%  of  the  monthly  salary.  The  stock  must  be  paid  for 
within  three  years  and  interest  at  5%  is  charged  on  de- 
ferred payments. 

Employees  who  take  stock  receive  dividends  as  soon 
as  the  first  installment  is  paid,  and  if  they  retain  the 
stock  and  remain  in  the  company's  employ  for  five  years, 
rendering  satisfactory  service,  they  receive  an  extra  5% 
on  their  stock  for  each  of  those  years. 

The  extra  compensation  of  employees  who  cancel 
their  subscriptions  by  leaving  the  service  of  the  com- 
pany during  the  five  years'  period,  goes  into  a  fund  which 
is  distributed  at  the  end  of  the  period  among  the  remain- 
ing subscribers.  The  number  of  shares  for  which  an 
employee  may  subscribe  varies  according  to  salary  and 
length  of  service,  the  maximum  being  ten  shares. 

In  the  event  of  cancellation  of  subscription,  the  em- 
ployee receives  the  amount  paid  with  interest  at  5%, 
no  credit  for  dividends  being  allowed.  The  company  has 
about  4,500  employees. 

Keystone  Driller  Co. 

See  Percentage  of  Profits. 

F.   P.    KiRKENDALL  &   CoMPANY. 
OMAHA,  NEB.     190G. 

Those  who  have  been  employed  for  more  than  one 
year  **and  who  prove  themselves  worthy"  are  permitted 
to  subscribe  for  common  stock,  the  payments  coming 
out  of  the  dividends  declared  upon  it.  The  employees 
are,  however,  charged  7%  interest  on  unpaid  balances, 
and  may  dispose  of  their  stock  only  to  the  corporation. 

The  company  is  planning  to  have  the  men  subscribe 
to  preferred  stock  instead  of  common  stock,  which  they 
think  will  be  more  satisfactory. 


154 

Lever  Brothers,  Limited, 
soap  manufacturers.    cambridge,  mass.    1909. 

This  plant  is  a  branch  of  an  English  company,  and  a 
full  description  of  the  profit-sharing  plan  will  be  found 
in  the  chapter  on  ''Experience  in  England." 

Minneapolis,  St.  Paul  and  Sault  Sainte  Marie  Railway 

Company. 

minneapolis,  minn.    1913. 

About  one-seventh  (or  2,000)  of  the  company's  em- 
ployees are  members  of  an  incorporated  association.  This 
number  includes  men  in  the  service  of  the  company  from 
the  president  down  to  track  men,  of  whom  there  are  two 
to  three  hundred.  To  become  a  member  an  employee 
subscribes  for  one  share  of  the  association's  stock,  valued 
at  $1.  No  member  is  permitted  to  hold  more  than  one 
share.  Each  member  deposits  with  the  association  every 
month  $1  or  more,  which  is  invested  by  the  officers  of 
the  association  in  stock  of  the  railroad  company,  or  one 
of  its  subsidiaries. 

Dividends  are  paid  to  members  of  the  association 
each  year.  Members  leaving  the  company's  service  are 
refunded  the  $1  paid  for  association  stock,  as  well  as 
their  deposits  with  the  fund  less  their  proportion  of  the 
actual  expense  of  administration.  The  employees  during 
the  first  year  under  this  plan  deposited  about  $100,000, 
all  of  which  was  invested  in  the  company's  stock. 

National  Biscuit  Company, 
new  york  city.    1901. 

Employees  are  given  an  opportunity  to  invest  their 
savings  in  the  company's  Preferred  Stock  upon  the  fol- 
lowing conditions: 

Application  may  be  made  for  one  share  of  stock  by 
any  employee  and  payments  on  the  purchase  price  must 
be  at  the  rate  of  $5  or  a  multiple  thereof.    Interest  at 


155 

4%  is  credited  on  these  payments.  When  the  stock  is 
fully  paid  for,  it  is  transferred  to  the  employee,  plus 
any  excess  of  dividend  declared  in  the  meantime  above 
4%  interest  on  the  price  paid  by  the  company  for  the 
share  of  stock  when  purchased  for  the  employee's  ac- 
count. Thereafter,  all  dividends  are  paid  in  full  to  the 
owner  of  the  stock. 

If  no  payments  are  made  for  six  consecutive  months, 
or  if  the  stock  is  not  fully  paid  for  within  two  years,  the 
company  may  cancel  the  arrangement  and  refund  the 
payments  actually  made,  with  accrued  interest.  Em- 
ployees desiring  to  withdraw  from  the  arrangement  may 
have  their  payments  returned  with  accrued  interest,  and 
employees  who  leave  the  company's  service  must  either 
pay  up  the  balance  due  on  the  share  subscribed  for  or 
accept  the  amount  to  their  credit  in  cash  with  interest. 

National  Carbon  Company, 
cleveland,  ohio.    1914. 

The  employees  are  permitted  to  subscribe  for  shares 
of  the  Common  Stock  of  the  company  at  the  price  of  $100 
per  share.  The  maximum  number  of  shares  varies  in 
the  case  of  each  employee,  according  to  his  annual  wages. 

All  subscriptions  must  be  paid  in  not  more  than  five 
nor  less  than  three  years  from  the  date  of  the  first  pay- 
ment. The  payments  may  be  made  in  instalments,  as 
the  employee  may  elect,  except  that  at  least  1%  of  the 
subscription  price  must  be  paid  each  month. 

Dividends  are  credited  to  the  accounts  of  the  em- 
ployees as  in  the  case  of  regular  stockholders,  but  4:% 
interest  per  annum  will  be  charged  at  the  end  of  each 
three  months  on  deferred  payments.  Beginning  July, 
1915,  it  was  planned  to  credit  a  bonus  of  $5  per  share 
on  each  share  of  stock,  for  a  period  of  five  years,  if  the 
subscriber  remains  in  the  employ  of  the  company  and 
holds  his  stock.    Employees  who  resign  or  are  discharged 


156 

or  allow  their  average  monthly  payments  to  remain  be- 
low 1%  of  the  total  subscription  price,  for  three  months, 
or  cancel  their  subscriptions,  may  withdraw  the  exact 
amount  paid  in,  with  interest  thereon  at  4%- 

National  Cloak  &  Suit  Company. 
new  york  city.    1914. 

In  June,  1914,  the  company  discontinued  a  percentage 
of  profits  plan  (a  description  of  which  will  be  found 
under  Abandoned  Plans)  and  adopted  a  scheme  designed 
to  enable  all  those  who  were  included  under  the  old  one, 
and  a  great  many  more,  to  become  stockholders. 

To  each  employee  included  in  the  plan  a  certain  num- 
ber of  shares  is  allotted,  based  on  the  importance  of  his 
position.  The  total  allotment  is  spread  over  a  period 
of  five  years  and  only  one-fifth  of  the  total  can  be  taken 
up  in  any  one  year.  The  stock  is  allotted  at  a  price  of 
$25  per  share,  which  can  be  paid  for  in  monthly  install- 
ments. Any  one  paying  for  a  year's  allotment  at  one 
time  will  have  a  certificate  of  stock  issued  to  him  at  once. 
Those  who  complete  their  year's  payment  on  the  install- 
ment plan  will  have  their  certificates  issued  to  them  after 
the  twelfth  payment. 

Each  employee  acquiring  stock  in  this  manner  signs 
an  agreement  not  to  sell,  lend,  pledge  or  in  any  way  dis- 
pose of  the  stock  for  five  years.  Anyone  leaving  the 
employ  of  the  company  may  retain  such  stock  as  has 
been  fully  paid  for  and  issued,  but  forfeits  any  rights  to 
stock  allotted  for  subsequent  years.  The  company  agrees 
to  turn  over  to  his  estate,  without  further  payments,  the 
stock  allotted  to  any  employee  who  shall  die  before  the 
expiration  of  the  allotment  period.  The  company  further 
agrees,  when  dividends  are  paid  on  this  stock,  to 
credit  them  to  the  stock  for  the  benefit  of  the  person  to 
whom  said  stock  has  been  allotted.  No  interest  is  charged 
on  deferred  payments  until  after  dividends  are  paid. 


157 
N.  0.  Nelson  Manufacturing  Company. 

MANUFACTURERS  OF  PLUMBERS'  AND  MACHINISTS'  SUPPLIES. 

ST.  LOUIS,  MO.     1886. 

From  the  net  profits  of  the  company,  6%  is  paid  as 
interest  on  capital  stock  and  from  the  remainder  there 
is  divided  an  equal  percentage  on  the  capital  stock  and 
on  the  wages  of  employees  who  have  been  with  the  com- 
pany six  months.  The  dividends  to  employees  are  al- 
lowed to  accumulate  to  their  credit  and  are  then  finally 
paid  to  them  in  stock  of  the  company. 

The  plan,  since  adoption,  has  been  changed  slightly 
from  time  to  time.  After  the  panic  of  1903  no  dividends 
were  paid  for  several  years,  because  of  general  business 
conditions.  During  the  years  when  dividends  have  been 
declared  it  is  stated  that  the  percentage  paid  on  wages 
of  employees  has  ranged  from  5%  to  30%. 

To  prevent  employees  from  selling  their  stock,  the 
company  only  issues  certificates  after  three  years,  and 
employees  while  in  its  service  are  forbidden  to  sell  their 
stock.  In  meritorious  cases  the  company  buys  the  stock 
itself  from  employees  desiring  to  realize  on  it  in  cash. 

More  than  1,000  employees  participate  and  at  present 
own  about  one-third  of  the  capital  stock.  Mr.  Nelson 
reports  that  "The  plan  has  worked  satisfactorily,  has 
caused  no  trouble,  and  has  undoubtedly  increased  the 
effectiveness  and  profits  of  the  business." 

New  Haven.  Gas  Light  Company. 

NEW  HAVEN,  CT.     1907. 

Each  quarter  there  is  credited  to  the  account  of  every 
employee,  who  had  contracted  to  enter  the  profit-sharing 
scheme,  8%  on  the  wages  paid  him  for  the  preceding 
three  months.  This  is  at  the  same  rate  as  the  dividends 
paid  to  stockholders.  All  employees  who  have  been  with 
the  company  one  year,  except  executive  officers,  are 
eligible. 


158 

When  the  amount  credited  to  an  employee  equals  the 
market  value  of  one  or  more  shares  of  stock  in  the  com- 
pany, a  certificate  representing  such  shares  is  trans- 
ferred to  the  employee  as  his  property  to  keep  or  sell 
as  he  may  elect.  An  employee  may,  if  he  desires,  draw  out 
in  cash  funds  to  his  credit,  instead  of  taking  stock.  In 
such  case,  he  receives  only  one-half  of  the  amount  cred- 
ited in  his  name. 

If  employees  are  discharged  for  reasons  other  than 
drunkenness,  insubordination,  crime  or  destruction  of 
the  company's  property,  they  receive  their  full  balance. 
In  the  instances  named,  the  balance  is  forfeited.  Em- 
ployees leaving  of  their  own  volition  are  paid  one-half  of 
the  amount  to  their  credit,  except  when  a  woman  leaves 
to  marry,  in  which  case  she  receives  the  full  amount. 

The  company  reserves  the  right  to  refuse  permis- 
sion to  enter  into  this  contract  to  any  employee  who  lacks 
interest  in  the  company's  welfare,  and  may  also  cancel 
an  agreement  already  signed,  upon  one  week's  notice. 

The  company  has  not  found  this  scheme  an  unquali- 
fied success,  as  an  increasing  proportion  of  shares  has 
been  sold  and  turned  into  cash  by  the  employees.  There 
has,  however,  been  a  noticeable  increase  in  interest  and 
loyalty  on  the  part  of  those  retaining  their  stock. 

Paeke,  Davis  &  Company, 
manufacturers  of  drugs.    detroit,  mich.    1902. 

The  company  has  twice  allotted  to  employees  4,000 
shares  of  its  stock.  The  par  value  of  the  stock  is  $25, 
but  the  company  sold  it  to  the  employees  at  a  low  book 
value  and  practically  loaned  the  subscribers  the  purchase 
money  for  five  years  at  5%  interest.  The  first  4,000 
shares  were  distributed  principally  to  the  executive  staff, 
and  the  second  4,000  to  the  traveling  salesmen  and  valu- 
able subordinates  in  the  laboratories  and  offices. 

A  great  majority  of  the  beneficiaries  have  paid  for 
their  stock  and  may  have  purchased  more  at  the  mar- 


159 

ket  price.  Between  500  and  600  of  the  company's  3,500 
employees  are  stockholders.  Approximately  one-half  the 
stockholders  of  the  company  are  employees.  The  com- 
pany states: 

**We  consider  both  operations  an  unqualified  suc- 
cess. They  have  beyond  question  stimulated  the 
loyalty  and  devotion  of  our  employees;  very  few 
have  left  us  to  go  to  competition,  whereas  in  years 
gone  by,  our  establishment  was  a  veritable  nursery 
or  training-school  maintained  largely  for  the  bene- 
fit of  our  competitors." 

PicKANDS,  Mather  &  Company. 

STEAMSHIP    INTERESTS.     CLEVELAND,    OHIO.     1914. 

The  company  holds  in  tnist  2,500  shares  of  its  stock, 
which  may  be  purchased  by  masters  and  engineers  at 
par,  each  master  being  permitted  to  buy  from  one  to 
eight  shares  a  year  and  each  chief  engineer  from  one  to 
five.  Payments  must  be  made  in  monthly  installments 
in  such  amounts  as  the  subscriber  fixes,  except  that  stock 
must  be  paid  up  in  three  years.  Interest  at  5%  is  charged 
on  deferred  payments.  Dividends  are  credited  as  pay- 
ments on  stock.  Three  hundred  extra  shares  w^ere  set 
aside  for  distribution,  without  cost,  among  those  sub- 
scribers retaining  their  shares  until  1920. 

The  company  states  that  it  does  not  regard  the  sys- 
tem as  strictly  profit  sharing,  but  *'it  is  more  the  plan 
of  getting  our  chief  navigating  officers,  that  is,  the  mas- 
ters and  engineers,  interested  in  our  property." 

Pittsburgh  Coal  Company, 
pittsburgh,  pa.    1900. 

Employees  are  permitted  to  purchase  Common  or 
Preferred  Stock  of  the  Company  upon  monthly  payments 
of  not  less  than  $1  per  share.  These  payments  are  made 
to  the  Pittsburgh  Coal  Company's  Employees'  Associa- 


160 

tion,  which  invests  the  funds  as  they  accumulate  in  stock 
of  the  company  at  the  market  price  and  holds  same  for 
delivery  to  the  purchasers  when  their  subscriptions  are 
complete. 

Employees  who  pay  in  more  than  $1  per  month  are 
credited  with  5%  interest  on  the  excess.  When  all  the 
payments  on  stock  subscribed  for  during  any  one 
month,  plus  dividends  and  other  earnings  accrued  there- 
on, equal  the  average  cost  of  all  the  stock  purchased  for 
the  account  of  the  subscribers  of  that  month,  the  asso- 
ciation delivers  the  stock  to  the  subscribers.  A  sub- 
scriber who  leaves  the  company's  service  may,  if  he 
chooses,  keep  up  his  payments  until  his  purchase  con- 
tract is  completed.  Those  who  default  in  the  payment 
of  any  of  the  monthly  installments  are  charged  interest 
at  6%  on  the  arrears,  and  if  the  default  continues  three 
months  or  more,  the  association  may  cancel  the  con- 
tract and  return  the  subscriber's  deposits  with  interest 
at  5%.  The  privilege  of  withdrawing  deposits  with  in- 
terest at  5%  is  open  to  subscribers  who  wish  at  any  time 
to  cancel  their  contracts. 

During  the  first  nine  months  of  the  operation  of  the 
plan  234  employees  became  owners  of  2,460  shares  of 
the  company's  stock,  at  an  average  cost  to  the  purchasers 
of  $41.36  per  share.  The  latest  report  of  the  Employees' 
Association,  October,  1915,  shows  5,718  shares  paid  for 
and  delivered  and  6,414  shares  under  contract  for  de- 
livery upon  completion  of  the  payments.  Analysis  of  the 
tables  showing  the  distribution  of  the  stock  indicates  that 
of  the  6,414  shares  under  contract  5,236  stood  in  the 
names  of  thirty-nine  superintendents  and  one  foreman, 
the  remaining  1,178  shares  being  distributed  among  six- 
teen subsidiary  companies,  whether  in  the  names  of  offi- 
cers or  workingmen  does  not  appear.  For  a  number 
of  years,  no  dividends  were  paid  on  the  Preferred  Stock 
of  the  company,  which  accordingly  reduced  the  number 
of  employees  who  entered  upon  stock  purchase  con- 
tracts. 


161 

Procter  &  Gamble. 
^^.^  soap  manufacturers.    cincinnati,  ohio.    1887. 

In  the  year  1903  a  plan  for  dividends  through  stock 
ownership  was  inaugurated.  This,  with  slight  modifica- 
tions, is  in  effect  at  the  present  time,  and  is  regarded  by 
the  company  so  far  as  its  business  is  concerned  as  an 
unqualified  success.  The  company  reserves  the  right  to 
terminate  the  plan  at  the  end  of  any  fiscal  year. 

Employees  earning  not  more  than  $1,500  per  year 
(except  salesmen  and  traveling  representatives)  may 
upon  application  have  common  stock  of  the  company  pur- 
chased for  their  account  at  the  market  price,  to  an  amount 
equal  to  their  annual  wages.  This  stock  is  held  for  their 
benefit  by  three  trustees  appointed  by  the  directors  of 
the  company.  A  subscribing  employee  pays  at  the  time 
of  purchase  21/2%  of  the  cost  of  the  stock  and  not  less 
than  4%  additional  each  year  until  the  subscription  is 
complete.  Interest  at  3%  per  annum  is  charged  on  un- 
paid balances. 

Dividends  on  the  stock  are  credited  to  the  purchase 
account,  and  in  addition  each  subscriber  receives  a  trust 
receipt,  guaranteeing  to  the  holder  dividends  at  the  rate 
of  16%  per  annum  upon  the  wages  actually  earned,  pro- 
vided he  has  been  at  least  six  months  continuously  in  the 
service.  These  trust  receipt  dividends  are  credited 
towards  the  purchase  price  of  the  stock. 

Employees  in  the  service  five  and  ten  years  may  in- 
crease their  subscriptions  respectively  to  125%  and  150% 
of  their  annual  wages,  and  receive  trust  receipt  dividends 
of  20%  in  the  one  case  and  24%  in  the  other.  Employees 
whose  wages  are  raised  may  increase  their  subscriptions 
to  an  annual  wage  increase.  Employees  whose  wages  in- 
crease beyond  $1,500  per  annum  may,  under  certain 
conditions,  retain  their  stock. 

Employees  who  wish  to  withdraw  from  the  plan  in 
less  than  two  years  after  subscribing  for  stock  or  before 
35%  of  its  purchase  price  has  been  credited  to  their  ac- 


162 

count,  are  entitled  only  to  a  refund  of  the  actual  amount 
of  cash  they  have  paid  in.  Employees  leaving  after  two 
years  and  after  their  credit  has  reached  35%  of  the  pur- 
chase price  of  the  stock,  may  withdraw  their  cash  pay- 
ments plus  all  dividends  that  have  been  credited  to  their 
account,  provided  they  have  not  increased  their  payments 
by  more  than  5^0  of  their  subscription  within  the  two 
preceding  months  in  order  to  secure  this  withdrawal  priv- 
ilege. Written  notice  of  withdrawal  must  be  given.  Set- 
tlement is  made  with  employees,  who  resign  or  are  dis- 
charged, on  the  basis  of  the  status  of  their  accounts  at  the 
date  of  termination.  In  payments  to  estates  in  case  of 
death,  the  benefit  of  any  increase  in  market  value  is 
given.  Increased  value  accrues  to  those  withdrawing 
only  in  event  subscription  has  been  paid  in  full.  A  guar- 
antee is  given  against  loss  to  participants  in  case  of  de- 
cline in  market  value. 

It  is  reported  that  employees  now  own  more  than 
$1,600,000  worth  of  stock  of  the  company.  As  the  plan 
works  out,  a  subscription  for  say  $1,000  worth  of  stock 
is  fully  paid  for  in  about  four  years  and  becomes  the 
absolute  property  of  the   subscriber. 

The  first  profit-sharing  experiment  of  the  company 
was  simply  a  semi-annual  distribution  of  cash  at  a  cer- 
tain percentage,  proportionate  to  the  employee's  wages, 
the  rate  of  dividend  being  fixed  each  year,  and  based  upon 
the  current  earnings  of  the  firm. 

After  the  incorporation  of  the  company,  in  1890,  this 
plan  continued,  and  the  rate  of  profit-sharing  dividend 
conformed  to  the  annual  rate  of  dividend  upon  the  com- 
mon stock  of  the  company. 

At  first  the  profit-sharing  plan  was  extended  to  all 
employees,  but  soon  was  restricted  to  those  whose  wages 
were  $1,500.00  per  annum  or  less.  It  was  abandoned  for 
the  reason  that  nothing  was  accomplished  towards  stimu- 
lating the  employees  to  greater  effort.  Very  little  of  the 
extra  cash  was  saved  and  the  recipients  came  to  look  upon 


163 

the  dividends  as  a  regular  part  of  their  incomes,  and  as 
a  justification  for  extravagance  or  dissipation. 

Public  Service  Corporation  of  New  Jersey, 
newark,  n.  j.    1913. 

The  company  purchased  3,000  shares  of  its  stock  in 
the  open  market  and  sold  it  to  its  employees  upon  the 
installment  plan.  Installments  could  be  as  low  as  $1.50  a 
month,  at  which  rate  a  subscription  for  one  share  would 
be  completed  in  about  six  years.  Stock  cannot  be  dis- 
posed of  until  fully  paid  for  except  with  the  consent 
of  the  Welfare  Committee.  Employees  are  also  allowed 
to  buy  stock  outright  on  condition  that  it  be  held  three 
years. 

The  company  is  convinced  that  the  plan  is  successful, 
from  the  fact  that  the  allotment  was  considerably  over- 
subscribed. 

Rand,  McNally  and  Company, 
publishing  and  printing.    chicago,  ill.    1879. 

In  1879  the  company  began  to  interest  the  foremen 
and  heads  of  departments  in  the  business  by  distribut- 
ing among  them  shares  at  par  value,  the  terras  of  pay- 
ment (largely  out  of  dividends)  being  made  easy;  no  man 
could  hold  over  ten  shares.  This  plan  working  well,  the 
firm  in  1886  admitted  to  its  benefits  the  older  and  more 
skilful  workmen. 

H.  B.  Clow,  the  president,  wrote  March  23,  1916 : 
Then  the  stock  was  available  for  that  purpose.  It 
could  be  purchased  by  the  company  and  sold  to  the  em- 
ployees at  par.  But  at  the  present  time  there  is  no  treas- 
ury stock  available  and  the  only  stock  that  can  be  used 
for  this  purpose  is  that  which  can  be  purchased  in  the 
open  market  by  the  company  and  resold  to  employees 
at  the  purchase  price.  We  still  favor  such  purchases  by 
our  employees  and  there  is  now  no  limit  as  to  the  amount 
of  stock  they  may  secure. 


164 

Keinle-Salmon  Company. 

druggists,  jewelers  and  store  fixtures, 
baltimore,  md.    1890. 

A  profit-sharing  plan  was  introduced  in  1890,  under 
which  50%  of  the  yearly  profits  was  distributed  among 
the  various  heads  of  departments.  With  the  increase  of 
the  business,  it  was  found  that  practically  all  the  profits 
were  needed  for  reinvestment  in  the  plant.  The  firm 
was  then  incorporated  as  a  stock  company  and  about 
60%  of  the  stock  distributed  among  the  heads  of  de- 
partments and  a  few  other  employees  in  responsible  po- 
sitions. Payment  for  the  stock  was  to  be  made  out  of 
the  profits  of  the  business.  The  average  number  of  em- 
ployees is  from  100  to  125,  about  30  or  40  of  whom  are 
stockholders. 

The  general  manager  says : 

**I  personally  do  not  regard  this  feature  as  an 
unqualified  success,  in  comparison  with  a  close  co- 
partnership, as  I  hardly  think  that  the  average  em- 
ployee (unless  he  holds  a  very  large  amount  of  stock) 
is  as  much  interested  in  the  returns  of  his  stock  as 
he  is  in  his  fixed  wages  or  salary,  which  comes  to 
him  weekly  and  of  course  upon  which  he  depends. 

''I  regret  to  state  that  my  efforts  in  getting  the 
interested  employees  to  take  a  special  interest  in 
increasing  their  efficiency  in  behalf  of  the  company 
has  been  disappointing. 

"Furthermore,  under  this  system  the  employees 
advanced  in  years  lose  their  efficiency,  and  it  handi- 
caps us  in  discharging  them  and  getting  younger  and 
more  efficient  men  in  their  places." 

Republic  Iron  and  Steel  Company. 

NEW  YORK  CITY. 

This  company  maintains  a  stopk  subscription  plan 
very  similar  to  that  of  the  United  States  Steel  Corpora- 
tion, but  applying  only  to  heads  of  departments.  No 
detailed  description  of  the  system  has  been  issued. 


165 

Royal  Cocoa  Company, 
jersey  city,  n.  j.    1915. 

A  bonus  is  given  only  to  those  of  the  employees, 
whether  working  in  the  factory  or  office,  who  have  earned 
the  bonus  in  excess  of  the  regular  wages  paid;  it  is  not 
given  indiscriminately  to  all  on  a  percentage  system. 

This  bonus  is  paid  in  Second  Preferred  stock,  from 
the  surplus  earnings  remaining  after  dividends  have- 
been  paid  on  all  Preferred  stock  and  6%  on  the  Common 
stock.  The  right  to  participate  in  the  bonus  is  based  on 
points  awarded  during  the  year  for  cleanliness,  output, 
economy  and  suggestions.  Employees  may  also  purchase 
this  Second  Preferred  stock  outright,  and  those  who  do 
so  are  allowed  a  bonus  which  makes  the  percentage  of  in- 
come thereon  equal  to  that  paid  during  the  year  on  the 
Common  stock.  The  issue  of  this  Second  Preferred  stock 
offered  to  employees  in  April,  1915,  was  $50,000,  all  of 
which  was  subscribed  for  on  the  same  day. 

The  company  states  that  the  plan  has  not  been  in 
operation  long  enough  to  be  regarded  an  unqualified 
success. 

RoYCKOFT  Shop. 

PRINTERS,  BOOKBINDERS  AND  MAKERS  OF  ART  PRODUCTS. 

EAST  AURORA,  N.  Y. 

While  not  operating  what  can  be  strictly  defined 
as  a  profit-sharing  system,  Mr.  Hubbard's  plan  included 
the  sale  of  stock  to  employees,  upon  which  a  high  rate 
of  interest  was  paid.    Mr.  Hubbard  stated  in  May,  1915 : 

"As  a  general  proposition,  our  conclusion  regard- 
ing any  profit-sharing  scheme  is  that  unless  it  can 
be  so  arranged  that  the  employee  feels  he  is  getting 
this  particular  benefit  through  his  own  effort,  (and 
that  unless  he  puts  forth  an  effort  he  won't  get  it,) 
there  can  be  no  complete  success  to  the  scheme. 
Something  that  is  given  for  nothing  is  not  appre- 
ciated." 


166 

Springfield  Publishing  Company, 
springfield,  ohio.    1913. 

Preferred  Stock  of  the  company  (non-assessable)  to 
the  amount  of  $10,000.  was  offered  to  the  employees,  only 
for  subscription.  No  one  employee  can  invest  more 
than  $500.,  and  the  money  paid  in  bears  interest  at  the 
rate  of  seven  per  cent.  There  are  about  100  employees, 
all  of  whom  may  participate.  No  Preferred  Stock  can  be 
sold  outside. 

John  B.  Stetson  Company. 

See  Special  Distributions. 

Studebaker  Company. 
See  Percentage  of  Profits. 

Swift  &  Company, 
meat  packers.    chicago,  ill.    1904. 

The  company  purchases  its  stock  on  the  market  for 
an  employee  when  so  requested,  on  an  initial  payment  of 
10%,  taking  his  note  for  the  balance,  bearing  6%  interest, 
the  dividends  going  to  the  employee.  No  restrictions  are 
placed  upon  the  sale  of  the  stock  purchased  by  an  em- 
ployee, and  the  company  does  not  pay  any  bonus  in  addi- 
tion to  the  regular  dividends. 

About  3,500  of  the  35,000  employees  are  stockholders. 
Most  of  these  are  office  employees,  managers,  salesmen, 
superintendents  and  foremen.  The  rank  and  file  of  the 
workmen  do  not  participate  to  any  extent. 

J.  F.  Tapley  Company 

BOOK  manufacturers.     NEW  YORK  CITY. 

Selected  employees  who  have  done  particularly  good 
work  during  the  year  are  given  Preferred  Stock  of  the 
company — from  one  to  four  shares  each — at  Christmas 
time.    Only  a  limited  number  of  employees  participate^ 


167 

the  object  being  to  recognize  exceptionally  efficient  serv- 
ice and  hard  work. 

Union  Switch  and  Signal  Company, 
swissvale,  pa.    1911. 

The  common  stock  is  offered  to  all  employees  except 
directors  and  general  executive  officers  at  $75  a  share. 
Payments  must  be  made  in  monthly  installments  of  not 
less  than  2%  of  the  value  of  the  stock,  and  subscriptions 
must  be  completed  in  fifty  months.  Dividends  are  cred- 
ited on  the  stock  after  24%  of  its  value  has  been  paid  in. 
If  the  employee  leaves  his  stock  with  the  company  after 
it  has  been  fully  paid  up,  he  receives  in  addition  to  the 
regular  dividend  an  extra  $5  per  share  for  every  year 
he  remains  with  the  company  until  $25  has  been  paid  on 
each  share,  thereby  reducing  its  actual  cost  to  $50  per 
share.  During  the  first  four  years  under  this  offer,  1956 
shares  were  sold  to  450  employees,  and  the  company  con- 
siders the  plan  a  success. 

United  States  Rubber  Company  and  Subsidiaries, 
new  york  city.    1912. 

A  certain  sum  is  set  aside  each  year  for  distribution 
among  such  officers  and  employees  of  the  company  as 
are  selected  by  the  executive  committee.  Those  employees 
whose  salaries  are  over  $5,000  receive  60%  of  their  share 
in  cash  and  the  remainder  in  conditional  certificates  of 
interest  in  the  Common  Stock  of  the  company  on  the  basis 
of  $50  a  share.  All  other  employees  receive  their  por- 
tion of  the  distribution  in  cash. 

Participants  receiving  stock  who  remain  with  the  com- 
pany until  1920  and  render  satisfactory  service  until  that 
time  will  receive  the  stock  called  for  by  the  conditional 
certificates.  During  this  period  employees  receive  all 
dividends  declared  on  the  stock  held  for  their  account. 
In  the  event  of  leaving  the  company  or  being  discharged 
such  participants  forfeit  all  right  to  the  stock,  which 
goes  into  a  fund  to  be  distributed  among  those  participat- 


168 

ing  officers  and  employees  who  remain  throughout  the 
period  stated. 

There  is  also  a  stock  subscription  plan,  under  which 
the  officers  and  employees  who  receive  wages  above 
$1,300  are  permitted  to  subscribe  for  shares  of  common 
stock  at  $50  a  share.  The  maximum  amount  for  which 
an  employee  may  subscribe  is  determined  by  the  execu- 
tive committee,  varying  according  to  his  salary  and  posi- 
tion. At  least  $5  must  be  paid  monthly  on  each  share. 
Interest  at  5%  is  charged  on  all  unpaid  balances. 

All  dividends  paid  on  the  stock  are  credited  to  the 
account  of  the  subscriber  until  the  stock  is  fully  paid 
and  issued  to  him.  If  the  subscription  is  canceled  be- 
fore the  stock  is  fully  paid  for,  the  exact  amount  of  pay- 
ments will  be  returned  with  5%  interest,  no  credit  being 
given  for  dividends  and  no  interest  being  charged  on 
deferred  payments. 

To  induce  employees  to  keep  their  stock  for  at  least 
five  consecutive  years,  the  company  makes  a  cash  pay- 
ment of  $3  a  share  for  each  of  the  five  years.  Upon  retain- 
ing stock  for  that  period  and  remaining  in  the  service 
of  the  company,  the  latter  pays  still  further  compensa- 
tion from  a  special  fund  made  up  of  forfeited  stock, 
which  is  also  credited  with  bjo  interest. 

The  United  States  Steel  Corporation. 

NEW  YORK.     1903. 

Under  this  plan,  the  employee  purchases  stock  in  the 
employing  corporation,  pays  for  the  same  in  instalments, 
and,  in  addition  to  the  regular  dividends,  receives  a 
bonus  of  so  many  dollars  per  share  in  consideration  of  his 
not  disposing  of  the  stock  or  leaving  the  company's  em- 
ploy for  a  certain  fixed  period  of  time. 

A  number  of  the  largest  companies  in  the  country  have 
adopted  this  plan.  The  United  States  Steel  Corporation 
has  used  it  longer  than  has  an}^  other  company  and  its 


169 

scheme  seems  to  be  the  model  in  this  field.    Other  com- 
panies which  have  closely  followed  its  plan  are  ; 

United  States  Rubber  Company; 

National  Carbon  Company; 

Union  Switch  and  Signal  Company; 

International  Nickel  Company;  and 

American  Telephone  and  Telegraph  Company. 

Some  of  the  essential  features  of  the  Steel  Corpora- 
tion plan  are: 

Every  year  the  corporation  offers  Preferred  and 
Common  Stock  for  sale  to  its  officers  and  employees 
at  cost  slightly  below  the  market  value. 

Subscriptions  are  paid  in  monthly  instalments,  to 
be  not  less  than  $2.50  per  share  for  Preferred  Stock 
and  $1.50  per  share  for  Common  Stock.  No  instal- 
ment can  exceed  25%  of  the  month's  salary.  Interest 
at  5%  is  charged  on  deferred  payments. 

All  dividends  are  credited  to  the  account  of  the 
subscriber  and  the  total  of  payments  and  dividends 
must  fully  pay  for  the  stock  within  three  years. 

To  induce  the  employee  to  keep  the  stock  after 
it  is  fully  paid  up  and  delivered  to  him,  a  bonus  of 
$5.00  for  each  preferred  share  and  a  bonus  of  $3.50 
(increased  to  $5.00  in  1916  subscription)  for  each 
common  share  are  paid  to  the  employee  at  the  end 
of  each  year  upon  presentation  by  him  of  the  certi- 
ficate of  stock  to  the  treasurer  of  the  company.  This 
continues  for  five  years. 

Non-paid-up  subscriptions  may  be  cancelled,  and  the 
money  which  has  been  paid  in  is  refunded  to  the  em- 
ployee with  5  per  cent  interest.  Premiums  are  not  paid 
to  employees  who  cancel  their  subscriptions,  sell  their 
stock  or  leave  the  employ  of  the  company.  An  official 
of  the  company  states  that: 


II 


If  there  is  a  large  advance  in  the  market  price 
he  may  figure  that  more  money  will  bo  made  by 
selling  it  than  holding  for  the  special  fund." 


170 

The  forfeited  or  unpaid  premiums  are  kept  in  a  fund  and 
divided  pro  rata  among  the  remaining  shareholders  un- 
der this  plan  at  the  end  of  the  five-year  period.  For  the 
first  five-year  term  this  fund  amounted  to  $65.04  per 
share;  a  notable  ''bonanza"  for  the  remaining  stock- 
holders, it  is  true,  although  revealing  on  the  other  hand, 
the  large  proportion  of  withdrawals  and  cancellations 
which  must  have  taken  place  during  that  period.  The 
end  of  the  2nd  5-year  period  showed  a  special  bonus  of 
a  little  over  $19.00  per  share  and  has  been  about  the 
same  each  year  since. 

In  the  event  of  the  death  of  an  employee  who  has 
subscribed  for  stock  and  made  payments  under  this 
plan,  his  estate  receives  the  unpaid  premiums  for  the 
full  five-year  period  and  a  pro  rata  share  of  the  undi- 
vided premiums  at  the  time  of  his  death. 

The  following  statement  is  made  by  an  oflficial  of  the 
corporation : 

''It  is  impossible  to  ascertain  how  many  employ- 
ees in  addition  to  those  yet  receiving  the  special 
benefits  that  continue  for  5  years  hold  stock  upon 
which  these  special  benefits  have  ceased  to  be  paid 
but  it  is  conservatively  estimated  that  it  would 
increase  the  number  to  about  50,000." 

The  reports  issued  by  this  corporation  in  1915,  ap- 
plying to  the  year  1913,  show  the  following  condition: 

Average  number  of  employees  228,906 

Number  of  employees  holding  stock  in  the 
company  and  receiving  a  bonus  of  $5  per 
share  35.026 

Number  of  shares  of  capital  stock  outstanding  8,685,836 

Number  of  shares  of  stock  held  by  employees  146,462 

Salaries  and  wages  paid  to  employees $207,206,176 

Amount  expended  by  company  account  of 
stock  subscription  plan,  approximately....  $1,000,000 

Proportion  of  employees  holding  stock  and 
receiving  a  bonus  thereon 15  per  cent 

Proportion  of  outstanding  stock  held  by  em- 
ployees upon  which  a  bonus  is  paid lA  per  cent 

Cost  to  the  company    of    stock    subscription 

plan  compared  with  salary  and  wage  bill. .  one-half  of  one  per  cent 


171 

On  Dec.  19,  1915,  there  was  announced  in  the  press 
a  special  distribution  of  bonuses  of  nearly  $2,000,000  to 
officers,  heads  of  departments,  superintendents  and 
minor  executives.  This  is  based  on  the  enormous  profits 
for  the  calendar  year,  one  of  the  best  in  the  company's 
history;  and  is  in  addition  to  the  profit-sharing  plan  for 
the  employees  above  described. 

U.  S.  Motor  Company. 

< Reported  to  be  same  as  "Model  formulated  by  U.  S.  Steel  Corp.") 

Valentine  &  Bentley  Silk  Company, 
newton,  n.  j.    1902. 

After  a  year's  trial  with  a  system  of  profit  sharing 
to  which  only  heads  of  departments  were  admitted,  the 
privilege  was  opened  to  all  employees.  They  were  offer- 
ed the  opportunity  to  purchase  on  easy  terms  the  com- 
pany's bonds  at  the  rate  of  5  per  cent  interest.  In  addi- 
tion the  holders  of  these  bonds  are  credited  with  a  bonus 
from  a  fund  set  aside  from  the  profits,  the  payment  being 
made  in  cash  at  the  end  of  a  five-year  period. 

("Social  Engineering."     1909.     William  H.  Tolman.  Ph.D.) 

Ward  Baking  Company. 

(See  also  Percentage  of  Profits.) 

Charles  Warner  Company. 

manufacturers  and  distributors,  cement,  lime,  etc. 

wilmington,  del.    1912. 

Surplus  profits  are  distributed  by  this  company  in 
the  form  of  its  Common  Stock,  which  it  purchases  for 
the  purpose  in  the  open  market.  One-third  of  the  net 
surplus  earnings,  after  payment  of  7%  dividends  on  Pre- 
ferred shares  and  6%  on  Common  Stock,  is  set  aside  for 
distribution  among  the  employees. 

The  stock  assigned  to  the  participating  employees  is 
held  for  them  for  a  period  of  five  years,  meanwhile  all 
dividends  being  paid  to  them  in  cash.    In  the  event  of 


172 

death,  resignation  or  lay-off,  stock  is  promptly  issued  to 
the  employee  or  his  heirs. 

The  executive  committee  of  the  company  reserves  the 
right  to  withhold  the  stock  from  any  employee  for  cause, 
such  stock  then  reverting  to  the  profit-sharing  fund. 
Only  employees  who  show  special  effort  in  the  company's 
service  are  entitled  to  participate  in  the  surplus  profits. 
The  distribution  is  not  in  proportion  to  wages,  but  all 
employees  are  divided  into  four  classes.  A,  B,  C  and  D, 
according  to  efficiency;  the  A  group  receiving  the  maxi- 
mum share  and  the  D  group  the  minimum.  All  employees 
are  eligible  except  officials  of  the  company  and  wagon 
drivers,  yard  helpers,  etc. 

There  is  also  a  stock  subscription  plan,  under  which 
every  January  the  company  offers  to  its  employees  its 
first  and  second  Preferred  Stock  at  a  price  slightly  lower 
than  the  market  value.  Each  employee  may  subscribe 
to  an  amount  not  exceeding  30%  of  his  salary.  The  lower 
salaried  employees  receive  preference  if  the  allotment 
of  stock  is  over-subscribed.  The  company  purchases 
this  stock  in  the  open  market,  for  re-sale  to  subscribing 
employees.    , 

Payments  are  permitted  in  instalments  of  $2.50  per 
share,  to  be  deducted  monthly  from  the  salary  check. 
Interest  is  charged  upon  the  unpaid  balances  at  the  rate 
of  5%,  this  being  deducted  from  the  regular  dividends 
of  7%. 

The  company  reports  it  does  not  regard  the  plan  as 
an  unqualified  success,  for  it  has  been  unable  to  increase 
its  earning  capacity.  During  years  when  no  distribu- 
tion was  made  a  very  unsatisfactory  feeling  was  caused 
among  the  employees.  The  management  believes  thor- 
oughly in  the  principle  of  profit  sharing,  but  states  that 
"it  is  hard  to  make  the  average  employee  be  satisfied 
with  the  working  out  of  these  principles,  if  there  happen 
to  be  two  or  three  poor  years  and  the  profits  do  not  de- 
velop above  the  dead  line." 


173 

YouNGSTowN-  Sheet  and  Tube  Company. 

YOUNGSTOWN,   OHIO.     1913. 

Stock  is  offered  to  heads  of  departments  and  their 
chief  assistants  at  a  price  considerably  below  the  market 
value,  varying  according  to  the  length  of  service  of  the 
subscriber.  About  125  are  eligible.  Interest  is  charged 
the  employee  at  5%  on  the  unpaid  balance  and  all  divi- 
dends in  excess  of  this  interest  charge  are  credited  to  the 
stock,  together  with  such  cash  payments  as  the  employee 
may  elect  to  make.  No  certificate  is  issued  in  less  than 
two  years  from  the  date  of  subscription. 

The  company  also  pays  a  bonus  to  all  employees, 
whenever  earnings  justify  it.  This  bonus  is  based  on  the 
wages  of  each  employee  during  the  year.  Officers  of  the 
company  do  not  participate.  The  bonus  has  ranged  from 
3%  to  6%  on  yearly  wages.  It  was  announced  in  Jan- 
uary, 1916,  that  the  annual  distribution  in  March  would 
be  at  the  rate  of  5%,  the  total  amount  being  about 
$350,000. 

The  company  reports  that  the  stock  plan  is  a  success, 
but  that  the  bonus  distribution  has  developed  several 
bad  features,  including  tendency  on  the  part  of  the  em- 
ployees to  spend  their  bonus  money  carelessly  or  to  plan 
expenses  in  anticipation  of  the  extra  payments. 

EXCEPTIONAL  PLANS. 

The  a.  W.  Burritt  Company, 
lumber  and  timber.    bridgeport,  conn.    1902. 

The  plan  of  the  A.  W.  Burritt  Company  of  Bridge- 
port, Conn.,  is  unique  among  profit-sharing  plans.  It 
is,  in  substance  and  effect  if  not  legally,  a  co-part- 
nership between  capital  and  labor.  It  is  the  only  one  of 
the  plans  investigated  under  which  the  employee  ''takes 
a  chance"  in  the  sense  of  sustaining  an  actual  and  tangi- 
ble financial  loss  if  the  business  itself  suffers  a  loss. 

The  company  is  engaged  in  the  lumber  business  and 
has  250  employees,  of  whom  about  100  are  affected  by 


174 

the  plan.  The  plan  is  limited  practically  to  the  skilled 
workmen,  of  whom  not  more  than  three-quarters  are  al- 
lowed to  participate  for  the  reason  that  the  business  is 
subject  to  fluctuations  and  the  company  does  not  wish  the 
contract  to  apply  to  a  larger  force  than  it  can  be  reason- 
ably sure  of  providing  with  steady  work.  Employees 
desiring  to  participate  execute  a  Profit  and  Loss  Sharing 
Contract  with  the  company  by  which  they  agree  to  share 
the  profits  and  losses  of  the  business. 

Under  the  arrangement  the  company  retains  each 
week  one-tenth  of  the  employees'  wages  to  be  held  by  it 
as  a  reserve  fund,  from  which  to  make  good  their  share 
in  the  losses,  if  any.  In  case  of  no  loss,  this  reserve 
money  is  refunded  to  the  employees  on  or  before  the  end 
of  each  year. 

The  profits  and  losses  are  ascertained  as  follows: 
An  inventory  is  taken  on  February  1  of  each  year.  From 
the  gross  results  thus  obtained,  shall  be  taken  all  ex- 
penses of  every  kind,  including  depreciation  of  buildings, 
tools  and  machinery,  and  bad  debts:  and  the  results  of 
the  above  shall  be  considered  the  net  gain  or  loss,  as  the 
case  may  be.  If  the  result  thus  shown  shall  be  gain,  the 
capital  actually  invested  as  shown  by  the  inventory  at 
the  close  of  each  year  shall  first  draw  six  per  cent  in- 
terest (or  in  case  there  is  less  than  that  amount,  shall 
draw  what  net  gain  there  is,  in  liquidation  of  its  claim) ; 
the  balance  then  remaining  shall  be  divided  between  the 
company  and  the  participating  employees  in  such  propor- 
tions as  their  total  wages  for  the  current  year  bear  to 
the  actual  capital  invested. 

In  case  there  should  be  a  net  loss  made  on  the  busi- 
ness of  the  year,  without  figuring  any  dividend  for  cap- 
ital, the  loss  is  divided  between  the  company  and  par- 
ticipating employees  in  the  same  manner  as  described 
for  dividing  profit;  but  the  employee  in  no  case  becomes 
responsi])le  for  losses  greater  than  the  amount  reserved 
from  his  wages. 


175 

Other  significant  sections  of  the  contract  are  the  fol- 
lowing : 

* '  The  party  of  the  first  part  can  at  any  time  dis- 
charge any  party  of  the  second  part  from  its  employ 
and  require  him  to  withdraw  from  this  contract,  but, 
in  such  case,  said  party  of  the  second  part  shall  have 
the  option  to  withdraw  his  full  reserve  or  to  leave 
it  until  the  end  of  the  year  to  share  in  results  as 
above  described. 

"It  is  further  agreed  by  the  party  of  the  first 
part  that  no  party  of  the  second  part  shall  be  tem- 
porarily retired  from  work  so  long  as  the  party  of 
the  first  part  has  any  work  of  the  kind  said  party 
of  the  second  part  is  accustomed  to  do ;  but  if  there 
should  be  a  shortage  of  work  in  the  hands  of  the 
party  of  the  first  part,  it  shall  reduce  the  hours  of 
work  and  so  divide  the  work  between  the  parties  of 
the  second  part.  If  at  any  time  any  party  of  the 
second  part  should  become  sick  or  incapacitated  to 
perform  his  duties,  and  has  the  certificate  of  a  reput- 
able physician  that  he  is  so  incapacitated,  after  two 
weeks  duration  of  said  sickness,  said  party  can  draw 
on  his  reserve  wages  at  a  rate  not  greater  than  six 
dollars  ($6.00)  per  week,  without  affecting  his  inter- 
ests in  the  profits  at  the  end  of  the  year.  Further, 
if  any  party  of  the  second  part  should  become  in- 
jured on  account  of  any  accident  while  in  the  employ 
of  the  party  of  the  first  part,  said  party  of  the  first 
part  shall,  at  its  own  expense,  provide  him  with  a 
competent  physician  or  surgeon,  after  application  is 
made  to  it  stating  that  such  services  are  needed. 

"If  any  of  the  parties  of  the  second  part  wish  to 
inquire  into  the  accuracy  of  the  annual  report  made 
to  them  by  the  party  of  the  first  part,  the  books  of 
the  party  of  the  first  part  shall  be  opened  for  in- 
spection by  any  reputable  Public  Accountant  em- 
ployed by  the  partv  of  the  second  part,  provided 
such  Accountant  will  agree  to  confine  his  report  to 
the  statement  that  the  Company's  report  was  or  was 
not  correct,  and  if  not  correct,  shall  fully  define  its 
error. 

"It  is  agreed  that  all  differences  and  disputes  re- 
sulting from  the  operation  of  this  contract  shall'  be 
settled  by  arbitration. 


>  J 


176 

The  company  states  that  the  employees  affected  have 
averaged  a  profit  of  about  6%  on  their  annual  incomes. 
There  has  never  been  a  loss  since  the  inception  of  the 
plan.  The  nearest  approach  to  a  loss  was  in  the  year 
1908.  At  the  beginning  of  that  year  a  meeting  of  the 
profit-sharing  emploj^ees  was  called  by  the  company  and 
they  were  plainly  told  that  the  company  was  looking  for- 
ward to  a  year  in  which  there  would  probably  be  a  loss, 
and  that  if  there  were  any  faint-hearted  among  them 
they  might  retire  without  creating  offense.  The  employ- 
ees stated  that  they  had  shared  the  profits  and  did  not 
expect  to  run  in  case  of  adversity.  Not  a  single  em- 
ployee withdrew,  and  an  official  of  the  company  states: 
"We  have  very  little  fear  that  a  single  year's  loss  would 
affect  them  very  seriously.  Of  course,  if  it  should  con- 
tinue for  more  than  a  year,  it  would  be  very  likely  to 
cause  many  or  most  of  the  men  to  withdraw.  But  we 
think  they  would  stand  one  year  without  serious  effects." 

The  same  official  says  further:  ''I  feel  safe  in  saying 
that  the  local  unions  in  our  town  and  in  our  trade  believe 
that  our  profit-sharing  plan  is  a  good  thing  for  our  em- 
ployees, and  it  has  been  the  means  of  maintaining  a 
friendly  relationship  with  organized  labor,  even  at  times 
when  we  were  strenuously  opposing  their  methods  and 
their  demands." 

With  reference  to  the  motive  of  the  company  in  mak- 
ing the  experiment,  this  official  states:  ''Our  object  in 
going  into  this  thing  was  to  get  the  hearty  co-operation 
of  the  workmen,  with  the  feeling  on  our  part  that  the 
price  we  were  paying  for  such  co-operation  was  the  per- 
centage of  profit  which  this  contract  produced.  It  was 
more  a  business  proposition  with  us  than  a  philan- 
thropic one." 

Dennison  Manufacturing  Company. 

manufacturers  op  tags  and  paper  specialties.    south 

framingham,  mass.    1911. 

It  was  recently  reported  that  this  company  had  solved 
the  problem  of  democracy  in  industry  by  providing  that 


177 

the  **wage  earners  shall  control  the  business."  This 
was  assumed  to  mean  that  the  stock  of  the  company  had 
been  turned  over  to  the  two  thousand  or  more  employees. 

Mr.  Henry  S.  Dennison,  the  treasurer  of  the  company, 
in  a  letter  to  Ralph  M.  Easley,  Chairman  of  the  Execu- 
tive Council  of  The  National  Civic  Federation,  under 
date  of  May  3,  1915,  said: 

*'I  am  enclosing  a  copy  of  our  Articles  of  Asso- 
ciation and  Bj^-Laws,  also  a  paper  bearing  on  our 
Industrial  Partnership  plan.  These  will  correct  cer- 
tain misleading  statements  in  recent  newspaper  ar- 
ticles, since  but  220  of  our  employees  are  Industrial 
Partners.  Further,  the  plan  has  been  in  operation 
since  December,  1911,  upon  the  re-incorporation  of 
our  Company,  and  the  results  have  been  very  grati- 
fying." 

Under  the  plan  First  Preferred  eight  per  cent  cumu- 
lative stock  was  issued  to  the  owners  of  the  business  to 
the  amount  of  four  and  a  half  million  dollars.  The  com- 
pany then  created  a  class  of  what  is  called  Industrial 
Partners,  composed  of  employees  who  have  been  with  the 
company  five,  six  or  seven  years  and  whose  yearly  re- 
muneration is  $1,800,  $1,500  and  $1,200  respectively,  con- 
sisting of  officers,  managers,  superintendents  and  fore- 
men. 

After  the  payment  of  dividends  on  the  Preferred  Stock 
and  certain  other  reservations  out  of  earnings  are  made, 
the  additional  profits  are  retained  in  the  business  and 
against  them  are  issued  to  the  so-called  Industrial  Part- 
ners what  is  called  Industrial  Partnership  Stock.  This 
stock  is  non-transferable  and  non-assignable.  When  an 
employee  leaves  the  service  of  the  company,  dividends  on 
his  Industrial  Partnership  Stock  cease  and  the  company 
may  buy  his  stock  at  par  or  exchange  it  for  non-voting 
Second  Preferred  Stock  which  is  entitled  to  a  dividend 
of  at  least  four  per  cent  before  dividends  are  paid  on  the 


178 

Industrial  Partnership  Stock.  Dividends  on  the  Indus- 
trial Partnership  stock  cannot  exceed  20%,  and  cannot 
amount  to  more  than  one-half  the  net  profits  after  Pre- 
ferred Stock  dividends  are  paid. 

After  one  million  dollars  of  the  Industrial  Partnership 
Stock  has  been  issued,  the  entire  voting  power  vests  in 
the  holders  thereof  to  the  exclusion  of  the  Preferred 
Stockholders  unless  the  company  shall  fail  to  pay  the 
stated  dividends  on  the  Preferred  Stock,  in  which  event 
the  voting  power  reverts  to  the  First  Preferred  Stock- 
holders. They  regain  control  if  less  than  four  per  cent 
is  paid  in  any  one  year  and  if  a  four-year  period  shows 
less  than  the  full  eight  per  cent,  paid  per  annum,  the  vot- 
ing power  returns  permanently  to  the  First  Preferred 
Stockholders. 

The  plan  does  not  reach  the  rank  and  file  and  is  not 
intended  to  do  so  as  it  is  limited  to  employees  receiving 
$1,200  per  year  and  upwards,  so  that  the  number  affected 
by  the  plan  is  about  10  per  cent  of  the  total  number  of 
employees. 

The  employees  do  not  exercise  any  control  of  the  busi- 
ness until  profits  to  the  extent  of  one  million  dollars 
have  been  earned  over  and  above  dividends  to  First  Pre- 
ferred Stockholders  and  there  are  certain  other  reserva- 
tions. If  they  do  acquire  the  voting  power,  the  retention 
of  it  by  them  is  conditioned  solely  by  their  ability  to 
maintain  sufficient  profits  to  pay  the  dividends  on  the 
Preferred  Stock.  Certain  critics  have  termed  this  an  in- 
genious efficiency  mechanism  for  safeguarding  the  eight 
per  cent  cumulative  dividend  to  the  original  stockholders, 
and  have  suggested  that  instead  of  being  a  benefit  to  the 
rank  and  file,  it  may  be  conceived  to  be  a  pace-making 
instrument,  because  the  officials  and  managers  would 
endeavor  to  keep  the  power  in  their  own  hands,  and 
this  could  only  be  done  by  earning  the  full  eight  per  cent, 
annual  dividend  for  the  Preferred  Stockholders,  which  in 
turn  it  is  charged  would  mean  the  speeding  up  of  the 
men. 


179 

The  Ford  Motor  Company, 
detroit,  mich. 

In  January,  1914,  the  Ford  Motor  Company  of  Detroit 
adopted  a  scheme  which  was  such  a  radical  deviation 
from  the  ordinary  profit-sharing  plans  then  in  existence 
that  this  report  would  be  incomplete  without  a  more  or 
less  detailed  description  of  it.  On  account  of  the  novel 
character  of  the  plan  and  the  large  number  of  men  af- 
fected, it  was  the  subject  of  much  comment  throughout 
the  country. 

Whether  the  underlying  motive  of  Henry  Ford  and 
his  associates  was  wholly  humanitarian  or  whether  the 
plan  was  conceived  with  the  idea  that  it  would  be  good 
advertising,  or  whether  both  of  these  considerations  en- 
tered into  its  adoption,  the  fact  is  that  it  has  been  bene- 
ficial for  the  employees  and  good  business  for  the  com- 
pany. 

Mr.  Ford  claims  that  he  proceeded  upon  the  theory 
that ' '  all  problems  are  solved  by  the  elimination  of  worry 
through  the  payment  of  adequate  wages"  and  he  accord- 
ingly inaugurated  a  plan  whereby  all  of  the  employees 
that  met  the  requirements  of  the  plan  would  receive,  in 
addition  to  their  wages,  a  share  of  the  profits  so  that  the 
minimum  wage  would  be  $5  per  day. 

It  was  determined  to  base  wages  upon  certain  hourly 
rates,  ranging  from  thirty-four  cents  to  eighty  cents. 

With  an  eight-hour  day  schedule,  the  plan,  so  far  as 
it  affects  the  shop  employees,  works  out  as  follows : 


Profit  Sharing 

Total 

Rate  per  hour. 

rate  per  hour. 

income  per  day. 

$.80 

$.07^ 

$7.00 

.73 

•ll^/i 

6.75 

.68 

.13^4 

6.50 

.61 

.17J^ 

6.25 

.54 

.21 

6.00 

.48 

.2m 

5.75 

.43 

.25^ 

5.50 

.38 

.275^ 

5.25 

.34 

.28 -^ 

5.00 

180 

An  employee  must  be  in  the  continuous  service  of  the 
company  for  at  least  six  months  to  be  eligible  to  partici- 
pate in  the  profit-sharing  scheme,  and  the  additional 
qualifications  are : 

1.  Married  men  living  with  and  taking  good  care 
of  their  families. 

2.  All  single  men  twenty-two  years  of  age  and 
over  of  proven  thrifty  habits. 

3.  All  single  men  under  twenty-two  years  of  age 
who  are  the  sole  support  of  some  uext  of  kin  or  blood 
relation.  Girls  are  eligible  as  profit  sharers  only 
when  the  sole  support  of  some  next  of  kin  or  blood 
relation. 

Employees  are  not  allowed  time  off,  with  pay,  for  any 
cause  whatever,  and  are  docked  in  half -hours  for  all  time 
lost. 

An  employee  of  proven  thrifty  habits  is  defined  by 
the  company  as  one  that  does  not  indulge  in  the  excessive 
use  of  liquor,  nor  gamble,  nor  engage  in  any  malicious 
practice  derogatory  to  good,  physical  manhood  or  moral 
character  and  who  conserves  his  resources  and  makes  the 
most  of  the  opportunities  that  are  afforded  him  in  his 
work. 

An  employee  supporting  a  home  for  near  relatives  is 
defined  as  one  who  is  the  sole  support  of  his  next  of  kin, 
dependent  upon  him  and  resident  in  the  United  States. 

The  possibility  that  the  men  might  be  unable  to  adapt 
themselves  to  a  condition  of  sudden  affluence  was  met  by 
requiring  certain  standards  of  living  in  order  to  become 
participants  in  this  profit-sharing  plan. 

A  staff  of  investigators,  picked  for  their  fitness  as 
judges  of  human  nature,  visit  the  families  of  the  shop 
employees  to  learn  their  home  conditions.  At  the  incep- 
tion of  the  plan,  the  staff  consisted  of  two  hundred  men, 
which  has  since  been  reduced  to  forty.  In  their  inves- 
tigations to  ascertain  what  employees  were  eligible  to 
participate  in  the  profit-sharing  plan,  they  consulted 
every  possible  source  of  information — churches,  frater- 


181 

nal  organizations,  government  records,  family  bibles, 
passports — in  fact,  everything  that  they  thought  would 
give  the  truth  about  a  man  was  scrutinized. 

It  was  made  quite  evident  that  this  system,  under 
which  the  men  were  obliged  to  qualify  before  given  the 
increased  wage,  had  resulted  in  causing  many  of  the  em- 
ployees to  transform  their  homes  from  old  shacks  into 
respectable,  if  not  even  more  than  ordinarily  comfortable 
houses.  One  illustration  suffices  to  indicate  the  general 
condition.  An  old  small  tar-paper  shack,  in  which  there 
were  a  kitchen  (one  side  being  curtained  off  for  a  couch) 
one  bed-room  and  a  sitting-room,  was  still  being  occupied 
by  a  mother  and  son.  In  the  center  of  the  kitchen  was  a 
receptacle  containing  black  water  in  which  she  had  wash- 
ed the  linen  from  week  to  week  rather  than  carry  fresh 
water  from  a  neighborhood  hydrant.  The  yard  was  lit- 
tered with  tin  cans.  But  the  son  had  saved  money  enough 
to  make  a  payment  upon  a  lot  and  the  company  had 
given  him  credit  for  lumber.  He  had  almost  finished  a 
two-story  frame  cottage  of  a  substantial  character  and 
pleasing  appearance,  containing  bath  and  furnace.  As 
soon  as  he  had  shown  that  he  had  a  savings  account  and 
discontinued  spending  his  evenings  in  evil  resorts,  the 
company  increased  his  wages.  He  was  just  about  to 
abandon  the  old  shack  with  its  disordered  surroundings 
for  the  new  convenient  place,  where  his  mother  would  not 
have  to  carry  water  a  block  for  her  washing.  This  in- 
fluence on  the  moral  character  and  home  life  of  such  men 
and  their  families  can  only  be  regarded  as  an  improve- 
ment. 

Notwithstanding  the  scrutinv  to  which  the  men  were 
subjected,  in  the  first  ten  months  that  the  plan  was  in 
operation,  a  total  of  approximately  $8,000  was  obtained 
by  employees  falsely  representing  their  condition  so  as  to 
fraudulently  participate  in  the  plan.  Various  deceits 
were  resorted  to  in  such  cases ;  some  hired  women  to  pose 
as  their  wives  at  from  $2.50  to  $25  a  day,  some  borrowed 
children  and  others  borrowed  passports  and  bank  books. 


182 

The  company  early  established  its  right  in  the  court  to 
recover  the  money  thus  obtained  by  false  pretenses  and 
about  $8,000  was  paid  back  to  the  company.  When  the 
various  frauds  were  discovered,  the  men  perpetrating 
them  were  not  discharged  but  the  company  insisted  that 
they  return  the  money  and  start  in  all  over  again.  The 
company  is  proud  of  its  record  in  that  respect,  claim- 
ing that  it  is  a  vindication  of  the  painstaking  way  in  which 
the  company  is  trying  to  dispense  the  money  and  see  that 
it  is  used  for  the  purposes  for  which  it  was  originally 
designed. 

On  the  whole,  the  plan  has  been  beneficial  to  the  em- 
ployees and  community  alike.  The  company  states  that 
there  is  a  marked  increase  in  the  number  of  naturalized 
citizens ;  a  marked  improvement  in  the  tendencies  of  the 
men  towards  thrift  and  economy;  in  their  habits,  health 
and  physical  attributes,  and  that  there  is  a  tremendous 
drift  toward  better  living  conditions,  more  sanitary 
homes  and  a  cleaner  and  better  neighborhood.  In  the 
first  ten  months  of  the  plan  the  gain  per  man  in  bank 
deposits  was  ISQi/o  per  cent;  in  life  insurance,  86  per 
cent,  and  in  homes  owned,  87i/^  per  cent.  As  the  men 
have  committed  themselves  to  a  very  large  extent  to  the 
purchase  of  homes,  relying  upon  a  continuance  of  the 
payment  of  the  profit-sharing  addition  to  their  wages, 
they  would  be  confronted  with  a  very  serious  situation 
if  the  company  did  not  continue  to  pay  these  profit- 
sharing  additions. 

When  the  Ford  plan  was  announced  it  was  predicted 
that  industry  would  be  disturbed  in  the  city  of  Detroit 
and  very  likely  elsewhere,  as  no  other  firm  was  financially 
able  to  introduce  any  such  extravagant  system.  It  is  now 
contended  by  some,  but  the  idea  is  ridiculed  by  others, 
that  as  soon  as  a  real  competitor  enters  the  field  covered 
by  the  Ford  Company  it  will  have  to  discontinue  the  high 
wage  rate  now  being  paid.  Some  argue  that  others  are 
now  coming  along  and  will  have  to  be  reckoned  with  in 


183 

the  near  future,  but  the  friends  of  the  company  will  not 
admit  any  such  possibility. 

It  is  plain  that  the  labor  market  was  not  disturbed, 
as  was  predicted.  This  is  partly  due  to  the  fact  that 
when  the  system  was  introduced  unemployment  was  so 
great  that  men  were  willing  to  take  jobs  wherever  they 
could  get  them  and  at  current  wages. 

An  interesting  phase  of  the  situation  lies  in  the  fact 
that  even  at  the  highest  rate  paid,  namely  $7  a  day,  the 
employees  of  the  Ford  Company  do  not  get  as  much  as 
skilled  mechanics  in  the  same  industry  in  Detroit  where 
different  processes  are  employed  in  making  the  automo- 
biles of  a  higher  grade.  This  company,  specializing  to 
such  a  large  degree  and  depending  almost  entirely  upon 
machinery  with  unskilled  labor  to  guide  the  product  and 
handle  the  machines,  requires  almost  no  skilled  workman- 
ship. 

There  has  also  been  put  into  operation  a  profit-sharing 
plan  for  employees  other  than  the  shop  employees,  who 
are  qualified,  as  follows : 

Class  1.     Men  receiving  $200  a  month  or  more. 

Class  2.  Men  over  twenty-two  years  of  age,  receiv- 
ing less  than  $175  per  month. 

Class  3.  Men,  under  twenty-two  years  of  age,  and 
women. 

Class  4.    Salesmen. 

Class  1,  the  men  who  are  receiving  $200  per  month 
or  more,  are  the  heads  of  departments,  and  they  are  paid 
(besides  salary)  usually,  by  the  custom  of  the  company, 
at  the  end  of  the  year,  a  so-called  Bonus  for  Brains, 
which  is  awarded  on  the  basis  of  merit  and  individuality 
manifested  and  put  into  force  for  the  good  of  the  com- 
pany during  the  year. 

Class  2,  the  men  twenty-two  years  of  age  and  receiving 
from  $75  to  $175  per  month,  now  receive  from  $5  to  $7 
per  day. 


184 

Class  3,  the  men  under  twenty-two  years  of  age,  and 
women,  receiving  from  $30  to  $50  per  month,  now  re- 
ceive from  $2  to  $4  per  day. 

Class  4,  the  salesmen,  receive  a  minimum  of  $5  per 
day. 

Mr.  Ford  was  not  willing  to  admit  that  others  could 
not  adopt  his  plan.  AVhen  it  was  inaugurated,  in 
January,  1914,  the  company  made  an  appropriation  of 
ten  million  dollars  to  cover  the  increase  in  wages.  After 
one  year's  operation,  the  business  had  developed  to  such 
an  extent  that  the  additional  profits  were  vastly  in  excess 
of  the  increase  in  wages.  The  company  claims  that  this 
was  attributable  directly  to  the  greater  efficiency  of  the 
men  and  such  a  continuity  of  service  as  practically  to 
eliminate  any  turnover  in  labor. 

The  minimum  annual  labor  turnover  of  most  corpora- 
tions is  estimated  at  33  per  cent,  whereas  this  company 
claims  that  it  has  not  had  a  changing  force  and  that  its 
employment  department  has  been  active  only  when  the 
company  was  required  to  increase  its  force,  as  was  the 
case  in  April,  1915,  when  it  took  on  two  thousand  new 
men.  To  this  point  others  replied  that  in  time  of  depres- 
sion the  company  could  not  judge  as  to  the  possibilities 
of  a  turnover,  since  men  would  not  leave  during  such  a 
period  when  they  knew  that  they  could  not  get  work  else- 
where. 

There  has  been  no  noticeable  speeding  up  in  the  work 
of  the  employees.  An  official  of  another  automobile  com- 
pany in  Detroit,  who  spent  more  than  a  week  in  a  critical 
study  of  the  plan,  had  much  to  say  about  the  speeding  up 
of  the  workmen  in  certain  parts  of  the  works,  but  an  in- 
vestigation by  a  representative  of  the  Civic  Federation 
disclosed  that  this  contention  was  not  correct. 

While  the  Ford  plan  may  be  an  ideal  one  for  that 
plant,  it  is  not  applicable  generally  throughout  the  man- 
ufacturing industry  and  it  is  extremely  doubtful  if  there 


185 

are  many  concerns  that  could  successfully  adopt  it.  The 
Ford  Company  manufactures  and  sells  a  finished  product 
ready  for  delivery  to  the  consumer,  the  market  for  which 
it  is  able  to  create.  The  company  has  practically  no  rivals 
in  its  own  field  and  need  not  cut  prices  unless  it  sees  fit 
to  do  so  for  the  sake  of  larger  sales  and  still  larger  gross 
profits.  Therefore  it  is  able  to  fix  its  own  wage  scales 
without  reference  to  the  conditions  faced  by  concerns  in 
close  and  active  competition. 

Catering  to  the  market  for  low  priced  cars  and  spe- 
cializing in  one  type,  it  is  able  to  reap  the  benefit  of  cost- 
saving  methods  which  the  makers  of  a  series  of  models 
of  higher  priced  cars  cannot  utilize.  Such  exceptional 
conditions  permit  a  wage  outlay  which  might  prove  ab- 
solutely ruinous  to  a  manufacturer  who,  in  competition 
with  others,  manufactures  some  staple  article  where  the 
labor  item  enters  largely  into  its  cost  and  for  which  he 
could  not  create  any  particular  demand.  In  such  a  case, 
the  cost  of  the  article  would  be  determined  largely  by  the 
rate  of  wages  paid  by  manufacturers  generally  in  that 
industry  and  the  individual  manufacturer  would  there- 
fore necessarily  be  limited  in  the  amount  which  he  could 
profitably  pay  to  his  workmen. 

But  aside  from  the  financial  aspect  of  the  plan,  it  is 
essentially  paternalistic  and,  while  it  is  now  accepted  by 
the  employees,  a  very  large  percentage  of  whom  come 
from  countries  where  paternalism  prevails,  it  is  a  ques- 
tion whether  such  close  inspection  of  the  private  lives, 
habits  and  personal  accounts  will  be  tolerated  by  the 
foreigners  when  they  shall  have  become  Americanized. 
To  have  an  inspector  insist  upon  seeing  a  man's  savings 
bank  account  book,  his  receipts  for  payments  on  property, 
for  water  tax,  for  household  expenses  and  other  items 
that  enter  into  the  family  budget,  must  be  resented  ulti- 
mately by  those  who  have  come  into  the  spirit  of  our 
free  institutions. 


186 

Although  Mr.  Ford's  antipathy  to  trade  unions  is  well 
known,  their  basic  objections  to  profit-sharing  plans  gen- 
erally do  not  apply  with  the  same  force  to  his  plan,  as  it 
is  in  effect  an  increase  of  wages.  A  trade  unionist  cannot 
consistently  oppose  any  plan  which  definitely  establishes 
a  high  wage  scale;  but  the  autocratic  and  paternalistic 
features  of  the  Ford  plan  are  repugnant  to  the  spirit  of 
trade  unionism. 

It  will  be  seen  that  the  Ford  plan  is  not  in  reality  a 
true  profit-sharing  enterprise,  even  though  the  extra 
wage  payments  are  called  by  the  company  a  ''share  in 
the  profits."  These  payments  are  made  outright,  as  a 
part  of  the  regular  daily  wage ;  they  are  not  a  stated  per- 
centage of  the  annual  profits  nor  in  any  way  made  de- 
pendent upon  the  size  of  the  profits.  The  Ford  experi- 
ment may  therefore  be  put  in  a  class  by  itself  as  a  whole- 
sale increase  in  wages  made  possible  by  extraordinary 
conditions. 

ABANDONED  PLANS. 

A  true  test  of  profit  sharing  will  be  found  not  alone 
in  a  consideration  of  the  plans  which  are  now  in  opera- 
tion— new  as  well  as  old — but  in  an  examination  of  those 
which  have  been  abandoned  and  the  circumstances  sur- 
rounding their  discontinuance.  Other  instances  of  aban- 
doned schemes  may  be  found  in  accounts  of  plans  now 
in  operation  where  the  companies  have  tried  one  or  more 
methods. 

Lists  of  failures  may  be  found  in  N.  P.  Gilman's 
books,  **A  Dividend  to  Labor"  and  "Profit  Sharing  Be- 
tween Employer  and  Employee";  in  Sedley  Taylor's 
"Profit  Sharing"  and  in  the  reports  of  the  British  Board 
of  Trade  on  "Profit  Sharing  and  Labour  Co-partnership 
in  the  United  Kingdom"  and  "Profit  Staring  and 
Labour  Co-partnership  Abroad." 

Among  the  abandoned  experiments  of  considerable 
prominence  were  the  following: 


187 

American.  Smelting  and  Eefining  Company. 
'  new  york  city.    1903. 

Some  years  ago,  when  very  satisfactory  profits  were 
being  earned,  the  company  distributed  yearly  bonuses, 
based  on  percentages  of  wages,  to  all  heads  of  depart- 
ments and  employees  down  to  and  including  the  rank  of 
foreman.  The  total  distribution  in  1905  amounted  to 
about  $200,000.  The  company  does  not  assign  a  reason 
for  discontinuance  of  the  plan,  other  than  that  implied 
in  the  reference  to  diminished  net  earnings  in  recent 
years. 

The  Baidwin  Locomotive  Works, 
philadelphia,  pa. 

In  June,  1914,  an  officer  of  the  company  explained  its 
stock  subscription  plan  as  follows: 

''Leading  men  have  been  sold  stock  on  a  basis  of 
4%  for  money  involved,  workmen  preferred.  High- 
est possible  wages  to  be  paid  regularly.  Employees 
have  the  privilege  of  depositing  their  savings  at  4:% 
interest,  money  can  be  drawn  on  demand  without 
previous  notice.  No  attempt  is  made  to  interfere 
with  the  private  affairs  of  workmen." 

In  February,  1916,  the  president  of  the  company 
states  that  the  plan  has  been  discontinued  for  the  fol- 
lowing reason: 

"By  reason  of  the  large  advances  in  the  market 
values  of  our  common  stock,  it  became  profitable  to 
our  employees  to  sell  their  holdings  and  liquidate 
their  obligations  to  us.  Therefore,  all  of  the  bene- 
ficiaries of  the  arrangement  have  terminated  their 
obligations  and  the  Employees  Share  Fund  has  been 
closed. ' ' 

Boston  Elevated  Railway  Company. 

boston.  mass.    1902. 

Employees  engaged  in  car  service,  in  the  employ  of 
the  company  for  six  months  and  having  a  clean  record, 


188 

were  eligible  for  payments  from  a  bonus  fund  set  aside 
each  year.  About  4,000  employees  shared  in  the  annual 
distribution,  averaging  about  $15  per  man.  Since  enter- 
ing upon  contract  relations  with  the  Amalgamated  Asso- 
ciation of  Street  and  Electric  Railway  Employees,  this 
extra  distribution  has  been  discontinued. 

Boston  Herald, 
boston.  mass.   1887. 

The  proprietor  who  inaugurated  the  plan  for  the 
300  employees  retired  soon  thereafter.  Financial  embar- 
rassment of  the  firm  not  only  delayed  the  first  distribu- 
tion but  necessitated  the  reduction  of  the  rate  originally 
contemplated.  The  result  was  unsatisfactory  and  the 
scheme  was  not  continued  (N.  P.  Gilman).* 

Brewster  &  Company. 

CARRIAGE  BUILDERS.     NEW  YORK.     18C9-1872. 

This  firm  was  one  of  the  pioneers  in  profit  sharing  in 
this  country.  The  extreme  care  with  which  their  plan 
was  prepared,  the  favorable  auspices  under  which  it  was 
inaugurated  and  the  ill-fate  which  attended  it,  make  it  of 
more  than  passing  interest. 

In  October,  1869,  the  firm  submitted,  in  a  proposal 
for  an  "Industrial  Partnership"  with  its  employees,  the 
following  Percentage  of  Profits  Plan,  drawn  up  by  them 
in  conjunction  with  John  Stuart  Mill  and  John  Bright 
of  England : 

The  percentage  of  profits  which  labor  was  to  re- 
ceive was  determined  jointly  by  the  firm  and  a  com- 
mittee of  ten  employees  elected  by  the  shop.  The 
amount  agreed  upon  by  them  was  10%  of  the  net  an- 
nual profit,  which  was  distributed  among  the  em- 
ployees in  proportion  to  the  wages  earned  by  them 
respectively,  the  persons  to  share  in  the  fund  to  be 
determined  by  the  employees.  The  latter  organized 
the  ''Brewster  &  Co.  Industrial  Association,"  and 

*The  treasurer  writes  that  the  "Herald"  has  no  profit-sharing  plan 
and  never  had  one  that  became  operative.     Mar.  29,  1916. 


189 

adopted  a  constitution  which  contained  a  proposition 
as  follows: 

"Neither  this  Association  nor  any  member  there- 
of other  than  its  President  shall  have  any  voice  or 
authority  in  the  management  of  the  business  of 
Brewster  &  Co. ;  nor  shall  this  Association,  nor  any 
member  thereof,  have  the  right  to  bring  suit  against 
the  firm  of  Brewster  &  Co.,  or  any  member  of  said 
firm,  in  any  Court  of  Law  or  Equity,  to  determine 
or  recover  the  amount  of  any  share  or  shares  in  the 
moneys  mentioned  in  the  preamble  of  this  Constitu- 
tion; and  it  is  expressly  understood  that  the  wages 
agreed  to  be  paid  by  Brewster  &  Co.  shall  be  a  full 
compensation  for  all  services  rendered  by  any  mem- 
ber of  this  Association  while  in  the  employ  of  Brew- 
ster &  Co." 

In  presenting  the  profit-sharing  plan  to  their  em- 
ployees Brewster  &  Co.  said : 

''Recognizing  the  importance  of  harmonious  ac- 
tion in  business  operations,  and  believing  that  the 
interests  of  labor  and  capital  are  not  necessarily 
antagonistic,  but,  on  the  contrary,  can  be  made  iden- 
tical in  many  important  respects,  we  have  been  con- 
sidering and  maturing  a  plan  for  the  reorganization 
of  the  manufacturing  departments  of  our  business, 
in  such  manner  that  labor  shall  receive,  in  addition 
to  ordinary  wages,  a  portion  of  the  profits  accruing 
to  capital." 

Here  follow  the  details  of  the  plan  and  the  announce- 
ment continues  as  follows: 

"In  conclusion,  we  wish  it  to  be  distinctly  under- 
stood, that,  in  offering  this  plan  for  your  considera- 
tion, we  do  not  claim  to  be  prompted  solely  by  the 
interests  of  those  in  our  employ;  on  the  contrary,  we 
have  faith  that  it  will  serve  the  interests  of  all  con- 
cerned, and  are  free  to  say,  that  we  believe  we  shall 
be  gainers  in  proportion  to  your  gains;  and  we 
pledge  ourselves  that,  if  this  experiment,  during  the 
first  year,  shall  confirm  us  in  this  belief,  we  shall 
make  such  further  concessions  to  labor's  share  as 
will  satisfy  the  shop  of  our  faith  in  our  plan. 


190 


ill 


One  word  more.  We  make  this  proposition  at 
a  period  of  profound  peace  in  our  shop — when  there 
are  no  ugly  questions  to  be  answered,  or  demands 
to  be  silenced  by  it;  it  is  wholly  a  voluntary  act  on 
our  part.  Nor  do  we  come  to  you  with  this  offer  suf- 
fering from  any  disaster,  disappointment,  or  even 
discontent,  for  our  business  is  already  the  largest  of 
its  kind  in  the  United  States,  and  our  last  year  was 
in  every  way  the  most  successful  that  we  ever  ex- 
perienced. We  do  not,  therefore,  invite  your  co- 
operation in  order  to  restore  a  lost  or  impaired  busi- 
ness, or  to  make  good  a  deficit  capital;  but,  in  our 
prosperity  and  success,  we  do  it  for  our  mutual  bene- 
fit, and  that  together  we  may  demonstrate  that 
neither  labor  nor  capital  can  ever  so  efficiently  pro-: 
mote  its  own  advantage  as  when  it  seeks  it,  in  har- 
mony with  the  other,  and  with  generous  regard  for 
the  interest  of  the  other." 

In  explaining  the  discontinuance  of  the  plan  the  firm 
said : 

**We  are  sorry  to  say  that  it  proved  to  be  a  fail- 
ure, the  men  not  being  able  to  withstand  the  pressure 
from  a  general  strike  in  the  trade  to  join  the  outside 
movement.  To  show  their  foolishness  and  general 
disregard  for  their  own  welfare,  had  they  waited 
two  weeks  longer  they  would  have  been  entitled  to 
receive  some  $10,000  to  be  divided  among  them.  The 
generation  then  in  charge  of  the  business  considered 
that  the  movement  was  a  failure  and  gave  it  up." 

(Discontinued  in  1872  when  there  was  an  eight  hour 
strike.) 

The  Columbus  Railway,  Power  &  Light  Co. 

COLUMBUS,  OHIO.     1900-1913. 

In  1900  this  company  inaugurated  a  profit-sharing 
plan  by  giving  a  bonus  to  its  employees;  but  the  plan 
was  abandoned  in  1913  and  the  amounts  formerly  paid 
were  added  to  the  weekly  wage ;  the  reason  being,  as  the 
company  states,  that  a  great  many  employees  preferred 
to  receive  the  money  in  an  increased  wage  rather  than 


191 

to  have  it  show  as  a  gift  pure  and  simple,  which  it  did 
under  the  profit-sharing  scheme. 

Consolidated  Gas  Company  of  New  Jersey, 
long  branch,  n.  j.    1911-1914. 

The  plan  applied  to  the  water  gas  makers.  It  con- 
sisted of  a  monthly  cash  payment  and  was  based  on  the 
results  obtained  in  the  operation  of  the  water  gas  ma- 
chines. Three  items  were  considered — the  quality  of 
coal  used,  the  quantity  of  oil  required  and  the  time  per 
unit  of  gas  made  of  standard  quality. 

The  company  states  that  the  system  was  very  satis- 
factory for  some  time,  and  that  the  results  obtained 
through  it  were  wonderful.  It  states  the  reasons  for 
abandoning  the  plan  as  follows: 

"The  system  was  abandoned  for  several  reasons, 
principally  because  the  bonus  grew  to  such  an  ex- 
tent that  it  was  causing  dissatisfaction  among  all  the 
men  in  our  employ  who  were  not  receiving  a  share 
of  it.  The  gas  makers  were  drawing  larger  wages 
than  the  foremen  and  some  of  the  superintendents 
who  supposedly  had  very  much  better  positions  with 
the  company. 

''Another  reason  was  that  the  gas  meter  which 
measured  the  output  and  upon  which  the  bonus  was 
based  got  out  of  order  and  for  a  while  it  was  neces- 
sary to  estimate  our  output.  This  made  the  com- 
putation of  the  bonus  a  very  difficult  if  not  alto-, 
gether  an  impossible  thing. 

"Another  reason  for  abandoning  it  was  that  the 
results  were  not  dependent  altogether  upon  the  ef- 
forts of  the  men  themselves.  The  quality  of  ma- 
terials furnished,  weather  conditions  and  various 
other  items  over  which  they  had  no  control  playing 
at  times  a  more  important  part  than  the  men  them- 
selves. 

"We  rea:ard  it  as  having  been  a  groat  success. 
At  the  time  it  was  inaugurated  the  standard  was  low. 
The  men  on  the  machine  did  not  know  what  results 
could  be  obtained  and  were  satisfied  with  those  they 
were  getting.  They  are  of  a  class  of  men  who  take 
pride  in  doing  good  work  and  all  that  was  required 


192 

was  to  get  them  started  along  the  right  track,  and 
that  certainly  has  been  accomplished  by  the  bonus 
system.  It  is  now  nearly  a  year  since  we  aban- 
doned the  bonus  system  and  we  have  seen  no  notice- 
able falling  off  in  the  results.  We  are  paying  the 
men  a  much  higher  wage  than  formerly,  in  fact  a 
very  much  higher  wage  than  is  prevalent  among 
men  of  that  grade  in  this  section  of  the  country. 
We  did  this  because  we  felt  that  the  men  would  be 
apt  to  go  back  and  lose  the  incentive  that  they  form- 
erly had  if  the  bonus  was  removed  and  nothing  was 
done  to  make  up  for  it.  We  contemplate  a  bonus 
similar  to  this  in  other  departments. 

"We  do  not  plan  on  making  it  permanent  but  will 
announce  it  as  a  temporary  bonus  to  be  paid  for  a 
period  of  one  year  or  so,  and  if  at  the  end  of  the 
initial  period  it  has  not  served  its  purpose  it  may  be 
extended.  If  it  has  served  its  purpose  and  we  are 
satisfied  with  the  results  we  will  discontinue  it  but 
pay  the  men  a  wage  in  keeping  with  their  increased 
efficiency. ' ' 

The  Crump  Label  Company, 
montclair,  n.  j.    1890-1892. 

Ten  per  cent  of  the  earnings  of  the  company  was 
distributed  to  the  employees,  the  distribution  being  based 
upon  a  percentage  of  the  salary  of  each  employee  who 
had  been  with  the  company  for  a  period  of  one  year.  The 
company  had  225  employees,  but  discontinued  business 
in  1892. 

The  president  of  the  company  states  that  during  the 
short  time  the  plan  was  in  operation  '  ^  it  worked  advanta- 
geously as  a  great  and  cheerful  stimulant." 

Cunninghams  and  Company,  Ltd. 
window  glass  manufacturers.    pittsburgh,  pa.    1905. 

The  company  was  reported  to  have  entered  into  a 
profit-sharing  arrangement  with  its  workmen,  whereby 
$20  a  week  was  to  be  paid  to  blowers  and  $15  to  gath- 
erers during  continuance  of  the  blast.  After  disposal 
of  the  product  10%  of  the  net  earnings  was  to  be  de- 


193 

ducted  for  running  expenses  and  the  balance  shared  with 
the  workmen.  Many  were  expecting  a  large  dividend, 
but  the  sales  were  made  at  prices  which  left  nothing  for 
distribution  to  labor,  and  it  was  stated  that  much  dis- 
satisfaction developed  in  consequence. 

CUSHMAN-HOLLIS     CoMPANY. 
AUBURN,  ME.     1891. 

The  Ara  Cushman  Co.  had  a  cooperative  plan  in 
operation  from  1891  to  1893,  when,  owing  to  the  apparent 
disposition  on  the  part  of  their  employees  to  disregard 
its  intent  and  benefits,  and  also  owing  to  unfortunate 
labor  troubles,  the  plan  was  discontinued. 

In  1903  the  Ara  Cushman  Co.  was  succeeded  by  the 
Cushman-Hollis  Co.,  which  has  no  profit-sharing  plan 
at  the  present  time,  according  to  the  statement  of  its 
vice-president. 

Henry  A.  Dix  &  Sons  Company. 

MANUFACTURERS    OF   UNIFORMS.     NEW   YORK   CITY.     1914. 

In  February,  1914,  the  company  distributed  about 
$10,000  among  400  employees  in  the  form  of  a  dividend 
of  6%  upon  their  yearly  earnings,  with  the  addition  of 
a  ''length  bonus"  in  proportion  to  the  number  of  years 
of  service.  The  company  states  that  it  is  doubtful  whe- 
ther the  plan  will  be  continued,  as  it  has  only  been  tried 
once,  but  that  it  prefers  not  to  go  into  the  details  of  the 
reasons  for  this  decision. 

Driver-Harris  Wire  Company. 

HARRISON,  N.  J. 

About  nine  years  ago,  this  company  had  in  operation 
a  system  of  profit  sharing  which  was  abandoned  for  the 
following  reason,  as  stated  by  the  president  of  the  com- 
pany: 

**It  did  not  seem  to  work  well  and  it  did  not  ap- 
pear to  us  that  it  was  appreciated.  To  'cap  the 
climax',  there  was  a  threatened  strike  in  our  works 


194 

and  when  that  condition  presented  itself,  we  imme- 
diately decided  to  terminate  this  plan. ' ' 

The  company  is  giving  further  attention  to  the  idea, 
however,  and  hopes  at  some  future  time  to  develop  a 
profit-sharing  plan  which  will  be  mutually  advantageous, 

Emeey  and  Marshall  Company. 

manufacturers  of  women's  goodyear  welt, 
haverhill,  mass. 

For  about  four  years  the  company  had  in  operation 
a  bonus  plan  whereby  it  paid  to  each  employee,  who  had 
been  in  the  service  one  year,  1%  of  the  wages  earned 
during  the  preceding  twelve  months.  The  company  states 
that  it  believed  it  had  a  fine  plan  and  that  it  would  ac- 
complish certain  results,  but  that  a  large  proportion  of 
the  employees  did  not  appreciate  it  and  "in  order  to  get 
at  the  ones  who  did  not  appreciate  what  we  had  done, 
we  were  obliged  to  discontinue  this  plan." 

Sir  Christopher  Furness. 
wingate  collieries.    irvin  shipbuilding  co. 

See  Experience  in  England. 

The  E.  Guthrie  Company, 
wholesale  and  retail  dry  goods.    paducah,  ky. 

Every  six  months,  1%  of  the  total  cash  sales  was  dis- 
tributed among  all  the  employees,  in  proportion  to  sal- 
aries.    The  company  states: 

"We  found  that  our  employees  did  not  appre- 
ciate this  and  we  have  discontinued  the  plan." 

Hoffman  &  Billings  Manufacturing  Company, 
brass  and  iron  works.    milwaukee,  wis. 

Some  twenty  years  ago  this  company  shared  profits 
with  its  employees  by  first  setting  aside  6  per  cent  on 
the  capital  invested.  The  balance  of  the  profits  were 
divided  equally  between  the  capital  of  $200,000  and  a 


195 

pay  roll  of  approximately  the  same  amount.  After  two 
or  three  years'  operation  the  plan  was  abandoned,  for 
the  reason  as  stated  by  the  company  as  follows : 

"We  found  that  the  plan  worked  all  right  when 
there  were  profits  to  divide  but  when  the  firm  suffered 
a  loss  which  the  payroll  did  not  take  part  in,  our  men 
were  rather  out  of  sorts  about  it  as  they  figured  that 
there  always  must  be  a  profit  and  as  we  had  a  year  where 
we  did  not  have  a  profit,  we  found  our  plan  was  a  good 
deal  of  a  jug-handle  affair.  In  case  of  good  business  the 
men  would  always  win  but  in  case  of  poor  business  the 
firm  alone  stood  the  loss.  We  had  supposed  in  conduct- 
ing a  profit-sharing  plan  that  it  would  make  our  men  take 
more  interest  in  the  firm's  work  and  business,  but  we 
could  not  find  that  this  was  the  case.  They  were  always 
willing  to  take  the  proceeds  of  a  profitable  business  but 
they  did  not  give  us  anything  in  return  and  we  therefore 
dropped  the  profit-sharing  scheme  entirely." 

C.  Howard  Hunt  Pen  Company.  ] 

CAMDEN,  N.  J. 

Several  years  ago  the  company  made  experiments 
in  profit  sharing,  one  of  which  was  to  place  at  the  dis- 
posal of  each  foreman  a  block  of  the  company's  stock, 
to  be  paid  for  from  the  earnings  of  the  business.  The 
men  apparently  took  no  interest  in  the  plan  and  it  was 
discontinued. 

It  was  the  company's  custom  to  give  each  employee 
who  had  worked  a  full  month  one  day's  vacation  with 
pay,  or  two  weeks  for  a  full  year  of  service.  The  result 
at  first  was  to  keep  the  help  regularly  at  the  factory, 
but  they  gradually  tired  of  it  until  there  were  very  few 
benefiting  and  the  plan  was  dropped. 

The  Huron  Milling  Company, 
harbor  beach,  mich.    1909-1912. 

The  company  paid  a  bonus  for  length  of  service,  as 
follows:    for  one  year's  continuous  service  5%  of  wages; 


196 

two  years,  6% ;  three  years,  7%  ;  four  years,  8%  ;  five 
years,  9% ;  six  years  and  over,  10%. 

After  three  successive  years'  trial  the  plan  was  aban- 
doned, for  the  following  reasons,  as  stated  by  the  com- 
pany: 

**When  we  instituted  this  plan  we  were  having 
some  30  to  33%  of  changes  in  our  working  force 
annually.  We  gave  as  a  reason  for  the  paying  of 
the  bonus  that,  owing  to  the  fact  that  we  were  chem- 
ical manufacturers,  it  was  most  important  that  we 
should  have  careful  men  who  were  experienced  in 
tl;eir  jobs  and  that  we  did  not  like  to  see  so  many 
changes.  We  gave  the  plan  a  thorough  trial  for 
three  successive  years  and  found  that  it  made  no 
difference  whatever  in  the  percentage  of  changes 
annually.  These  took  place  almost  entirely  among 
the  floating  labor  engaged  in  the  outside  work,  dig- 
ging sewers,  etc.,  hence  we  found  that  they  never 
gave  the  bonus  plan  time  to  reach  them.  It  did  not 
seem  to  appeal  to  them  at  all.  At  the  end  of  three 
years  the  president  of  the  company,  who  was  some- 
what suspicious  of  the  popularity  of  the  plan,  dis- 
cussed it  thoroughly  with  a  number  of  our  older  and 
most  level-headed  employees,  and  they  stated  that 
while  the  plan  was  satisfactory  to  them,  it  was  not 
satisfactory  to  the  employees  as  a  rule ;  they  looked 
upon  it  as  a  pension,  and  the  idea  generally  ex- 
pressed was  this,  that  if  they  were  earning  any  more 
than  we  had  paid  them,  they  preferred  to  get  it  on 
the  regular  pay  days  rather  than  once  a  year;  also 
that  there  was  a  tendency  among  them  to  look  for- 
ward to  the  end  of  the  year,  relying  upon  this  bonus, 
and  to  being  more  extravagant  than  they  ordinarily 
would.  Their  statement  of  the  case  was  too  much 
for  us.  We  immediately  raised  wages  so  that  no 
man  should  lose  anything  by  the  loss  of  the  bonus, 
and  eliminated  the  bonus.  We  have  had  no  com- 
plaints since. 

''Most  of  our  employees  have  lived  here  for  a 
great  many  years.  They  are  largely  of  English  and 
German  descent,  are  very  independent,  and  cannot 
be  classed  with  the  ignorant  foreign  labor  which  most 
employers  have  to  deal  with  nowadays.  We  have 
had  a  profit-sharing  plan  in  our  minds  ever  since  we 


197 

gave  up  the  bonus  system  but  have  been  unable  to 
find  anyone  in  like  circumstances  to  our  own  with 
whom  it  has  been  successful.  There  are  some  manu- 
facturers whose  profits  are  so  large  either  from 
the  fact  that  they  own  patents  and  have  a  monopoly 
of  certain  products  or  articles,  or  from  other  rea- 
sons, that  they  are  able  to  indulge  in  profit-sharing 
plans  and  to  be  fairly  confident  that  they  can  always 
continue  to  have  something  to  share  with  their  em- 
ployees. In  our  business,  the  profits  are  only  normal. 
Sometimes  we  have  a  year  of  big  profits,  owing  to 
cheap  raw  materials,  but  usually  when  this  happens 
the  next  two  years  the  profits  will  be  so  small  that 
our  average  is  no  more  than  maintained  for  the 
three  years. 

"We  believe  in  profit  sharing  and  are  interested 
in  it,  but  as  human  nature  is  constituted  in  this  coun- 
try today,  or  at  least  in  this  town,  we  would  want 
to  be  pretty  sure  of  our  ground  before  starting  any 
such  thing,  as  if  through  dull  business  or  bad  luck, 
or  for  other  reasons,  we  were  unable  to  divide  profits 
for  one  year,  we  feel  that  it  would  cause  a  great 
deal  of  disappointment  and  trouble." 

This  company  has  always  paid  bonuses  to  department 
heads  and  still  continues  to  do  so,  finding  the  results 
satisfactory  in  every  way. 

The  S.  M.  Jones  Company. 

(Formerly  Acme  Sucker  Rod  Co.) 
TOLEDO,  OHIO. 

Profit  sharing  was  practiced  for  several  years  but  it 
was  given  up  some  years  ago,  according  to  statement  of 

Sept.  7,  1915. 

H.  E.  Lesan  Advertising  Agency,  Inc. 

NEW  YORK  CITY. 

The  company  put  in  operation  a  plan  of  sharing  the 
profits  with  its  employees,  which  it  described  under  the 
head  of  "Paying  Dividends  to  Workers"  as  follows: 

"The  profit-sharing  feature  of  the  association  is 
arranged  on  a  dividend  basis.     At  the  end  of  each 


198 

year,  every  employee  is  given  a  bonus  equal  to  a 
certain  percentage  of  his  or  her  yearly  salary.  This 
percentage  is  based  on  the  profits  of  the  business  for 
the  year,  and  is  determined  by  the  executive  offi- 
cers of  the  company.  Last  year,  in  addition  to  sal- 
aries, $2,000  was  distributed  among  the  members 
of  the  association  as  a  bonus,  on  the  basis  of  six  per 
cent  of  the  yearly  salary  of  each  employee. 

"When  the  association  was  organized,  a  system  of 
merits  and  demerits  was  inaugurated.  These  mer- 
its and  demerits  are  based  on  a  unit  of  five  dollars 
and  are  credited  to  or  deducted  from  the  amount  set 
aside  for  the  bonus  at  the  end  of  the  year.  Last 
year,  the  merits  exceeded  the  demerits,  and  the 
bonus  was  increased  one  and  one-half  per  cent,  mak- 
ing it  seven  and  one-half  per  cent  of  the  salaries. 
One  clerk  who  drew  a  salary  of  $1000  a  year,  re- 
ceived in  addition  a  bonus  of  seventy-five  dollars, 
while  stenographers  who  made  eighty  dollars  a 
month  got  a  bonus  of  seventy-two  dollars.  Five  per 
cent  of  this  is  paid  at  Christmas  and  the  balance  on 
demand  after  the  first  of  the  year. 

*'The  merit  system  affects  each  worker's  pay.  A 
merit  is  awarded  to  any  one  who  suggests  an  ac- 
ceptable "short  cut"  in  business  or  any  system 
which  will  save  time,  labor  or  expense  in  any  branch 
of  the  business." 

In  May,  1915,  the  company  stated  that  when  the  plan 
was  in  operation  it  was  successful  but  that  it  had  been 
discontinued,  owing  to  a  reduction  of  the  force,  for  va- 
rious reasons.  "We  believe  that  at  the  time  it  was  in- 
stalled and  operated  it  was  successful,  but 
plans  of  this  kind  depend  largely  upon  the  amount  of 
business  going  through  the  office. 


>  > 


The  Locomobile  Company  of  America, 
bridgeport,  conn.    1915. 

In  July,  1915,  the  company  announced  that  it  would 
put  into  effect  a  profit-sharing  plan  similar  to  that  of  the 
Ford  Motor  Company,  to  include  all  employees  from 
floor  sweepers  to  section  foremen.    There  was  to  be  first 


199 

a  wage  increase  of  from  8  to  13%  and  a  bonus  division 
every  two  weeks  in  proportion  to  the  wages  of  each  em- 
ployee, varying  in  amount  according  to  the  number  of 
cars  turned  out. 

Nearly  3,000  employees  were  affected,  but  the  com- 
pany states  that  the  plan  was  in  force  for  a  period  of 
only  thirty  days  and  was  abandoned  because  the  em- 
ployees expressed  a  preference  for  the  eight-hour  day  or 
forty-eight-hour  week. 

Metropolitan  Coal  Company. 

boston,  mass. 

The  plan  put  in  operation  by  this  company  is  de- 
scribed and  its  failure  explained  by  the  general  man- 
ager, in  December,  1909,  as  follows : 

"I  am  sorry  to  say  that  the  profit-sharing  plan 
which  we  instituted  was  a  dismal  failure.  This  was 
due,  we  are  convinced,  to  the  false  basis  on  which 
we  tried  to  found  it,  namely:  the  payment  to  the 
clerks  of  a  percentage  of  their  salary,  proportioned 
to  the  increased  number  of  tons  which  the  company 
sold  in  any  given  year.  This  being  with  the  idea 
that  it  would  cause  more  strenuous  efforts  to  make 
sales,  and  facilitate  the  business  of  the  company  in 
general,  through  the  hope  of  extra  reward.  It  did 
not,  however,  work  out  to  that  result,  principally  be- 
cause the  tonnage  in  our  business  is  so  seriously  af- 
fected by  the  weather,  and  in  addition  the  fact  that 
a  large  proportion  of  the  tonnage  is  made  up  of  con- 
tracts for  large  amounts  of  coal,  with  which  the 
clerks  have  nothing  to  do,  and  which  no  efforts  on 
their  part  could  affect.  We  also  found  a  general  dis- 
position to  regard  the  bonus  at  the  end  of  the  year, 
as  a  fixed  part  of  the  salary,  which  in  many  cases 
was  relied  upon  to  pay  bills,  and  meet  obligations, 
before  it  was  paid,  and  we  found  that  the  amount 
varied  so  greatly  that  it  caused  much  disappoint- 
ment and  such  bitter  feeling  that  after  three  years 
we  gave  up  the  whole  plan,  I  am,  personally,  and  I 
know  some  of  our  Directors  agree  with  me,  of  the 
opinion  that  the  fault  was  with  our  particular  ap- 


200 

plication  of  the  principle,  and  I  have  given  consid- 
erable time  and  attention  to  looking  into  systems  of 
profit  sharing,  with  a  view  to  trying  again  some- 
thing of  the  sort." 

Miami  Copper  Company. 
new  york  city.    1914-1915, 

In  July,  1914,  the  company  offered  to  all  employees 
the  privilege  of  subscribing  to  the  company's  stock  at  a 
nominal  quotation,  to  an  extent  optional  with  the  em- 
ployee, but  with  a  prescribed  maximum  limit  propor- 
tional to  the  wage  or  salary  earned.  The  salient  fea- 
tures of  this  plan  were  described  by  the  company  as 
follows : 

The  rights  and  interests  of  the  subscribers  as 
such  rest  with  the  decision  of  the  Board  of  Directors 
of  the  company; 

Payments  are  made  in  monthly  installments,  not 
exceeding  25%  of  the  wage  or  salary  earned; 

Declared  dividends  are  credited  as  subscription 
payments  and  interest  on  deferred  payments  is 
charged  at  the  rate  of  5%  per  annum; 

When  the  subscription  is  fully  paid  the  stock  is 
issued  to  the  subscriber,  and  he  therefore  obtains 
the  same  rights  of  disposal  as  the  ordinary  stock- 
holder. As  an  inducement  to  retain  the  stock,  a 
bonus  of  one  dollar  per  share  per  year  for  a  period 
of  five  years  is  offered  him  while  he  remains  in  the 
employ  of  the  company. 

Subscriptions  are  cancelled  at  the  request  of  the 
subscriber,  or  by  subscriber  leaving  service  of  the 
company,  or  whenever  subscription  payments  have 
been  discontinued  without  the  consent  of  the  com- 
pany for  a  period  of  three  months. 

Upon  cancellation  of  the  subscription  the  pay- 
ments made  by  the  subscriber  are  returned  to  him 
with  interest  at  5%  per  annum,  but  the  dividends 
credited  to  the  subscription  are  reclaimed. 

The  plan  has  been  abandoned  for  the  following  rea- 
son, as  stated  by  an  officer  of  the  company  in  December, 
1915: 


201 

"The  average  number  of  employees  of  the  com- 
pany is  1000.  Of  these  only  about  40  participated 
and  the  plan  failed  to  benefit  those  men  whom  it  was 
primarily  designed  to  benefit,  namely,  the  wage 
earners,  practically  all  those  participating  being 
salaried  men.  It  was,  therefore,  decided  not  to 
continue  it." 

National.  Cloak  &  Suit  Company. 

NEW  YORK  CITY. 

This  plan  included  those  employees  holding  respon- 
sible positions,  whose  efforts  would  materially  affect  the 
success  of  the  business.  A  certain  amount  of  profits  was 
set  aside  to  be  divided  among  these  men.  There  were 
three  classes,  as  follows : 

Class  A.  Men  who  had  been  with  the  company  a 
number  of  years  and  the  character  of  whose  work 
contributed  directly  towards  the  profits  as  a  whole. 

Class  B.  Men  also  with  us  for  a  number  of  years, 
but  held  less  responsible  positions  and  whose  ef- 
forts would  contribute  in  an  indirect  way  towards 
the  profits. 

Class  C.  Men  who  had  been  with  us  a  shorter  time 
and  who  had  been  recently  added  to  the  list  of  profit 
sharers. 

The  Class  *'A"  men  received  the  largest  percentage 
and  the  Class  ''C"  men  the  smallest  percentage  in  the 
distribution  of  these  profits.  The  company  does  not  care 
to  state  what  percentage  was  set  aside,  or  to  give  any 
further  details  as  to  the  actual  distribution. 

At  the  end  of  the  fiscal  year  June  30,  1914,  the  com- 
pany abandoned  the  above  plan  and  substituted  a  Stock 
Subscription  Plan,  a  description  of  which  will  be  found 
among  the  plans  now  in  force. 

NOETHWESTERN    GeNERAL.  TraDING   CoMPANY. 
SPOKANE,   WASH. 

This  company  reports  that  its  plan  was  discontinued 
in  1915. 


202 

An  Optical  Company. 

(Name  and  place  withheld  by  request  of  company.) 

1905. 

In  1905  an  optical  company  in  a  large  industrial  city 
made  a  distribution  of  the  profits  of  the  business  to  all 
salesmen,  heads  of  departments  and  workmen  who  had 
been  longest  in  its  employ.     The  provisions  were  that : 

The  capital  actually  invested  should  first  draw  7  per 
cent  interest,  the  balance  of  profits  then  remaining  to 
be  divided  in  such  proportion  as  the  capital  invested  in 
the  business  bore  to  the  salaries  and  wages  of  those  par- 
ticipating. Seven  per  cent  interest  per  annum  was  paid 
on  any  profits  or  funds  not  exceeding  $1000  left  with  the 
company. 

Other  employees  of  the  company  might  participate  in 
the  profits  upon  invitation,  but  the  computation  of  their 
share  was  figured  only  on  the  wages  earned  after  date 
of  notification.  Any  employee  not  under  contract  who 
withdrew  from  the  company's  employ,  and  gave  three 
months  notice,  might  still  participate  in  the  profits  while 
employed.  But  an  emploj^ee  under  contract  leaving 
without  the  company's  consent  would  not  be  entitled  to 
any  share  of  the  profits  for  that  year.  The  profit  share 
of  a  discharged  employee  was  based  on  the  salary  earned 
while  in  the  company's  employ.  March  28,  1916,  the 
company  reported  its  abandonment  for  certain  reasons. 

Page  Belting  Company, 
concord,  n.  h.    1887. 

This  plan  provided  that  if  a  profit  above  10  per  cent 
net  were  earned  on  the  capital  stock,  the  excess  up  to 
$1,200  would  be  divided  among  the  wage  earners.  The 
bonus  was  apportioned  according  to  merit,  valuable  sug- 
gestions and  economies,  and  continuous  satisfactory 
service  for  a  year.  The  company  at  first  considered  the 
plan  a  success  but  it  is  not  now  in  operation.  The  rea- 
sons for  its  discontinuance  cannot  be  ascertained. 


203 

Peace  Dale  Manufacturing  Company, 
manufacturers  of  woolen  fabrics.    peace  dale.  r.  i. 

187S. 

In  1878  the  company  adopted  the  plan  of  paying  the 
employees  a  certain  percentage  on  their  respective  earn- 
ings, according  to  length  of  service.  The  plan,  which  con- 
tinued in  effect  for  a  number  of  years,  was  described  and 
commented  upon  by  the  president  of  the  company  in 
December,  1909,  as  follows: 

"We  found  our  plan  here  was  open  to  the  objec- 
tion that  those  who  were  honestly  careful  and  solici- 
tous for  the  welfare  of  the  company,  and  who  tried 
to  make  the  individual  small  savings  of  waste  and 
wear  and  tear  possible  to  every  workman,  were  put 
upon  a  level  with  those  who  paid  no  attention  to 
their  own  part  in  the  scheme.  When  at  the  end  of 
the  year  the  amount  was  declared  and  set  aside,  the 
conscientious  fared  no  better  than  those  who  had 
not  been  so.  The  result  was  that  those  who  at  first 
tried  to  do  their  part  faithfully  were  affected  by  the 
evidence  they  had  that  they  would  fare  just  as  well 
if  they  made  no  more  effort  than  those  about  them 
whom  they  saw  making  none.  It  was  almost  impos- 
sible for  us  to  figure  out  a  plan  by  which  the  faith- 
ful could  be  differentiated  from  the  unfaithful.  That 
is  where  the  trouble  comes  in.  The  plan,  like  the 
sun,  shines  upon  the  just  and  the  unjust. 

"Our  plan  was  exceedingly  simple.  The  dividend 
declared  was  entirely  optional  with  the  directors, 
and  was  stated  to  the  recipients  to  be  a  freewill  of- 
fering on  the  part  of  the  company.  It  was  not  guar- 
anteed to  be  continued.  It  was  not  complicated  be- 
cause it  was  based  on  the  percentage  of  the  earnings 
of  each  one  who  had  been  a  certain  length  of  time  in 
the  employ  of  the  company,  seven  months  in  our 
case. 

"In  spite  of  this  plan,  which  was  subject  to  the 
fluctuations  of  the  business,  a  strike  developed  of 
such  pernicious  character  as  to  be  very  difficult  to 
reach.  It  was  amongst  the  weavers  who  refused  'to 
try  a  kind  of  work  which  they  had  not  done  before, 
although  it  was  figured  out  to  the  satisfaction  of  all 
the  experts  that  they  could  make  more  money  on  the 


204 

new  work  than  on  the  old.  Being  a  new  departure, 
they  would  not  try  it,  and,  rather  than  try  it,  they 
struck.  They  did  not  complain  of  having  had  too 
small  wages  before.  They  only  complained  of  being 
asked  to  do  something  they  were  not  asked  to  do  be- 
fore, which  seems  so  irrational  a  ground  as  to  be 
hardly  believable,  and  yet  I  am  sure  there  was  no 
other  ground. 

•'My  objection  to  the  plan  is  then  fundame^^'^al. 
At  present  we  are  in  a  very  great  quandary  to  know 
what  to  do.  The  strike  has  been  long  since  cured, 
and  the  men  were  proved  to  be  in  the  wrong.  They 
came  back  without  obtaining  any  of  the  points  they 
sought  to  establish,  amongst  others  a  closed  shop, 
but  it  was  a  very  trying  affair." 

PiLLSBUEY- Washburn  Company. 

FLOUR  MILLERS.     MINNEAPOLIS,  MINN. 

In  1882,  the  company  adopted  a  plan  of  paying  out 
of  its  profits  a  bonus  to  its  responsible  employees  in  the 
offices  and  mills,  including  its  skilled  workmen.  The 
plan  continued  in  effect  for  a  number  of  years,  during 
several  of  which  the  company  paid  a  bonus.  But  its  suc- 
cessor, the  present  Pillsbury  Flour  Mills  Company, 
states  that  the  plan  was  abandoned  because  it  did  not 
work  out  successfully. 

Thomas  Gt.  Plant  Company, 
shoe  manufacturers.    boston,  mass.    1905. 

A  profit-sharing  dividend  was  paid  quarterly  to  em- 
ployees who  had  been  with  the  company  not  less  than 
three  months  and  who  met  the  requirements  of  a  system 
of  ratings  in  respect  to  attendance,  cleanliness,  deport- 
ment, industry  and  quality  of  work. 

For  the  purposes  of  this  rating  system,  the  employ- 
ees were  divided  into  four  classes.  The  dividend  to 
Class  A  was  equivalent  to  one  week's  pay;  to  Class  B, 
four  days'  pay;  to  Class  C,  two  days'  pay,  while  those 
in  Class  D  received  no  dividend.  The  rating  was  by 
points  which  were  placed  to  the  credit  of  employees  as 


205 

follows :  60  points  for  first  class  work ;  45  points  for  the 
best  record  of  lates  and  stay  outs ;  30  points  for  good 
workers  and  20  points  for  cleanliness  and  deportment. 
The  foremen  submitted  weekly  reports  of  the  markings 
and  a  committee  appointed  by  the  company  passed  on 
the  records  and  classified  the  employees  accordingly. 
The  company  also  made  the  offer  that  if  any  employee 
would  leave  10%  of  his  wages  on  deposit,  the  amount  to 
his  credit  would  be  doubled  and  the  total  might  then  be 
withdrawn  at  the  employee's  option  upon  one  week's 
notice. 

Mr.  Plant  severed  his  connection  with  the  company 
upon  its  transfer  to  other  ownership,  and  the  profit  shar- 
ing was  discontinued  at  the  end  of  the  year  1910.  On 
Christmas  of  that  year,  employees  who  had  worked  in 
the  factory  for  five  years  or  more  received  from  Mr. 
Plant  a  gift  of  not  exceeding  $10  for  each  year  of  their 
service. 

RiNGWALT  Linoleum  Works. 

NEW   BRUNSWICK,   N.   J.     1914. 

The  company  reports  (March  28,  1916)  that  its  plan, 
which  was  started  largely  in  the  nature  of  an  experiment 
and  which  applied  principally  to  heads  of  departments, 
was  discontinued  recently  as  the  results  did  not  seem  to 
warrant  its  retention. 

RoGEEs  Peet  Company. 

CLOTHIERS.     NEW  YORK  CITY.     1886. 

A  fixed  proportion  of  the  profits  was  divided  pro  rata 
among  the  employees,  not  including  heads  of  depart- 
ments. The  distribution  ranged  from  2i/2  to  5  per  cent 
on  the  annual  salaries  or  wages.  According  to  N.  P.  Gil- 
man  in  his  "Profit  Sharing  Between  Employer  and  Em- 
ployee," a  member  of  the  firm  stated  in  1887  that  under 
this  plan  the  men  were  working  with  more  zeal  and  in- 
telligence than  they  had  ever  shown  before,  doing  the 


206 

same  work  in  91/0  hours  that  they  had  previously  accom- 
plished in  10. 

After  four  years'  trial,  the  plan  was  abandoned  on 
account  of  a  strike  participated  in  by  a  considerable  pro 
portion  of  the  profit  sharers.  The  vice  president  of  the 
company  states  that  it  has  been  the  general  impression 
of  the  principal  officials  since  the  discontinuance  of 
profit-sharing,  that  it  was  "a  complete  failure  in  its 
primary  object — to  wit,  the  development  of  a  more  in- 
tense spirit  of  loyalty,  for  as  above  stated,  the  scheme 
expired  in  a  strike". 

St.  Louis  Shovel  Company, 
st.  louis,  mo. 

A  profit-sharing  plan  was  in  operation  a  number  of 
years  ago  at  this  plant,  which  is  owned  by  the  Ames 
Shovel  and  Tool  Company.  The  plan  was  abandoned 
on  account  of  a  strike,  which  the  company  states  was 
not  for  higher  wages,  but  for  unionizing  of  the  plant. 
The  shops  were  closed  for  four  months  and  profit  sharing 
was  discontinued. 

Saugerties  Manufacturing  Company, 
manufacturers  of  blank  books.    saugerties,  n.  y.    1901. 

For  a  number  of  years  a  profit-sharing  dividend  of 
5  per  cent  on  wages  was  distributed  among  the  employ- 
ees, but  an  officer  of  the  company  states  that  it  did  not 
accomplish  the  intended  purpose  of  encouraging  coop- 
eration. It  was  found  difficult  to  discriminate  between 
those  who  were  entitled  to  the  extra  payments  and  those 
who  were  not,  and  it  was  felt  that  a  distribution  only  to 
those  entitled  to  it  would  engender  ill  feeling  and  discon- 
tent.    The  scheme  was  abandoned  in  1911. 

Springfield  Foundry  Company, 
springfield,  mass. 

About  twenty  years  ago  this  company  maintained  a 
system  of  profit  sharing,  which  was  discontinued  for  the 


207 

following   reasons,   as   stated   by   the  president   of   the 
company : 

*'We  abandoned  profit  sharing  because  it  did  not 
seem  to  create  the  spirit  of  harmony  between  the 
workmen  and  the  officers  of  the  company  that  we 
anticipated  it  would;  and  the  workmen  seemed  to 
get  the  idea  that  they  should  be  consulted  on  mat- 
ters of  management  of  the  company's  affairs,  rather 
than  being  willing  to  confine  themselves  to  shop  con- 
ditions and  shop  details." 

Union  Mining  Company, 
mount  savage,  md.    1886. 

A  dividend  on  wages,  equivalent  to  10%  of  the  divi- 
dends declared  on  the  company's  stock,  was  paid  to  all 
employees  who  had  been  with  the  company  six  months 
or  longer.  Under  this  plan  the  300  employees  received 
two  dividends,  but  the  profit  sharing  was  then  discon- 
tinued on  account  of  a  strike.  The  president  of  the  com- 
pany, as  quoted  by  N.  P.  Gilman  in  his  ''Profit  Sharing 
Between  Employer  and  Employee,"  made  the  following 
statement  with  reference  to  this  experience : 

''I  do  not  believe  that  interest  or  painstaking  in  their 
work  has  quickened  among  5%  of  the  force."  The  men 
apparently  considered  ' '  only  the  money  advantage,  with- 
out taking  in  the  idea  that  by  their  own  efforts  they  could 
increase  it." 

On  the  eve  of  the  strike  in  1887,  according  to  Dr.  Gil- 
man,  "the  president  called  the  men  together;  corrected 
a  misapprehension  on  their  part  that  certain  new  works, 
costing  some  $40,000,  had  been  built  out  of  profits  (no 
provision  had  been  made  for  calling  in  an  accountant) ; 
pointed  out  the  excellent  prospect  for  a  dividend,  which 
they  would  forfeit  by  striking;  declared  that  a  strike 
would  surely  put  an  end  to  the  profit-sharing  plan;  and 
appealed  to  the  more  independent  of  the  men  to  organize 
in  support  of  the  company.  He  offered  an  increase  of 
5%  on  wages,  with  the  conditional  promise  of  as  much 


208 

more  at  the  end  of  twelve  months.    But  the  men  struck 

(only  one  standing  by  the  company),  and  afterwards 
refused  offers  of  arbitration  under  three  different  forms. 
The  strike  lasted  ten  days  and  then  began  to  break ;  but 
there  were  troubles  again  in  May  and  September,  which 
further  crippled  the  operations  of  the  company,  and 
spoiled  the  best  business  season  that  had  ever  offered 
itself;  the  employees  themselves  lost  in  wages  and  divi- 
dends between  $6,000  and  $8,000  in  ten  months.  The 
profit-sharing  plan  was  given  up  at  the  first  meeting  of 
the  directors  after  the  strike." 

Washington  Railway  and  Electric  Company, 
washington,  d.  c.    1912. 

It  was  found  in  1911  that  26 ^o  of  the  gross  earnings 
of  the  company  had  been  required  to  pay  trainmen's 
wages  and  damage  claims.  Every  year  since  that  time 
the  company  has  divided  among  the  conductors,  motor- 
men,  depot  clerks  and  starters  the  difference  between  the 
amount  of  the  wages  and  damage  claims  and  the  fixed 
sum  of  26%  of  the  earnings. 

The  distribution  is  based  on  the  length  of  service 
from  one  to  twelve  months,  all  men  in  the  service  one  year 
or  longer  receiving  the  same  amount. 

The  company  started  this  scheme  in  order  to  reduce 
the  accidents  and  induce  more  careful  handling  of  fares, 
but  according  to  their  1915  report  the  men  failed  to  grasp 
the  situation.  Damage  claims  and  accidents  increased 
so  that  the  share  of  profits  for  men  in  the  service  a  full 
year  or  more  was  only  $21.17  as  compared  with  $42.53 
for  1913.  In  part  explanation  the  president  of  the  com- 
pany cited  three  accident  settlements  involving  a  total 
expense  of  $22,563.95,  which  alone  diminished  the  profit 
sharing  check  by  $30.76.  This  official  concluded  that 
"general  cooperation  has  been  lacking,"  and  stated  that  a 
plan  had  been  adopted  for  giving  special  recognition  to 
the  faithful  employees,  ''both  by  marking  them  for  pre- 
ferment   and   increasing   their   share    in   the   profits." 


209 

There  are  about  800  employees,  and  under  this  new  mark- 
ing system  the  distribution  in  January,  1916,  to  full  year 
men  having  no  demerits  was  $23.17.  The  total  distribu- 
tion was  in  excess  of  $15,000.  The  company  reports  in 
February,  1916,  that:  "The  plan  has  worked  satis- 
factorily, both  to  the  men  and  to  the  company." 

(Since  this  analysis  was  prepared  the  plan  has  been 
abandoned  as  the  result  of  a  strike  occurring  on  the  lines 
of  this  company  early  in  March,  1916.  In  the  settlement 
of  the  strike  the  employees  have  secured  a  redaction  in 
working  hours,  increases  in  wages,  a  provision  for  arbi- 
tration of  grievances  and  certain  other  concessions.  Dur- 
ing the  strike  the  company  posted  a  notice  to  the  effect 
that  all  men  who  remained  at  their  posts  would  receive 
on  April  5  a  cash  bonus  of  $25.  **as  a  preliminary  pay- 
ment from  the  1916  profit-sharing  fund".  In  conse- 
quence of  the  new  concessions,  however,  the  company  has 
discontinued  all  benefit,  relief  and  profit-sharing 
features.) 

Wayne  Cut  Glass  Company. 

TOWANDA,  pa.     1914. 

The  directors  voted  to  set  aside  a  certain  percentage 
of  the  net  earnings  for  distribution  among  employees 
who  had  worked  faithfully  for  the  company  at  least  one 
year.  Soon  after  the  passage  of  this  resolution  there  was 
a  material  change  in  business  conditions,  which  the  com- 
pany ascribes  to  tariff  legislation,  and  instead  of  a  sur- 
plus to  distribute  the  year's  operations  showed  a  deficit. 
The  management  states  that  the  workingmen  were  not 
willing  to  take  this  fact  into  consideration  and  share 
the  losses  by  accepting  a  reduction  in  wages,  and  that 
all  consideration  of  profit  sharing  has  therefore  been 
abandoned  for  the  present.  When  conditions  permit,  the 
company  expects  to  take  it  up  again. 

Williams  Brothers  Company, 

LUMBER  dealers  AND  MANUFACTURERS  OF  LAST  BLOCKS. 
CADILLAC,  MICH.     1914-1915. 

On  January  1,  1914,  the  company  inaugurated  a  plan 
under  which  each  employee  was  to  be  paid  a  bonus  of 


210 

3%  of  his  wages  earned  through  the  preceding  year. 
The  plan  was  abandoned  after  one  year  on  account  of 
business  depression. 

The  company  states  that  the  plan  did  not  work  out 
to  any  great  advantage  to  the  company,  for  the  men 
seemed  to  accept  it  as  a  matter  of  course,  and  several  who 
had  been  with  the  company  from  ten  to  twenty  years 
left  for  other  places,  going  on  farms,  et  cetera.  The  com- 
pany also  states  that  it  was  its  intention  to  increase  the 
percentage  each  year  until  it  equalled  6  or  8%  of  the 
net  payroll. 

Wright  &  Potter  Printing  Company, 
boston,  mass. 

In  a  letter  of  March  27,  1916,  the  president  states: 
An  ancient  attempt  of  this  company  at  profit  sharing  was 
made  but  after  its  failure  nothing  more  was  done.  Our 
company  has  today  no  interest  whatever  in  the  matter 
and  owing  to  our  being  governed  so  to  speak  by  the  typo- 
graphical union,  we  feel  that  any  endeavor  to  establish 
a  profit  sharing  system  would  be  useless. 

PROPOSED  PLANS. 

A  number  of  companies  have  been  reported  recently 
as  about  to  introduce  profit  sharing  plans  of  which  the 
details  are  not  yet  complete.  Among  these  are  the  fol- 
lowing : 

Gurney  Ball  Bearing  Company,  Jamestown,  N.  Y. 
The  Conn  Company,  Elkhart,  Indiana. 
Friedman  Bros.,  Skirt  Manufacturers,  New  York. 
Hamilton-Beach  Company,  Racine,  Wis. 
Wagner  Pastry  Company,  Newark,  N.  J. 

Certain  large  corporate  interests  have  under  advise- 
ment the  establishment  of  the  following  stock-ownership 
plan  prepared  after  a  thorough  study  of  the  material  on 
profit  sharing  collected  by  The  National  Civic  Federa- 
tion for  the  purposes  of  this  report. 


211 
Extra  Wage  Distribution  and  Investment  Plan, 

Statement  of  Merits 

BY 

WILLIAM   W.   TRENCH* 

Extra  Wage  Distribution 

I.  Distributions  to  be  made  at  the  discretion  of  Board  of 

Directors  from  surplus  profits. 

(A)  To  all  employees  except  executive  officers. 

(B)  Distribution  varying  in  case  of  each  employee 

according   to   yearly   wage   and   length   of 
service  as: 

1.  .  .  %  of  yearly  salary  to  those  in  em- 

ploy of  Company  for  one  year. 

2.  . .%  being  1%  higher  to  those  in  em- 

ploy of  Company  two  years. 

3.  .  .  %  being  2%  higher  to  those  in  em- 

ploy of   Company  three   years   and 
over. 

(C)  Distribution  to  be  announced  four  months  in 

advance  of  actual  payment. 

(D)  Distribution  to  be  made  in  cash  but  employ- 

ees being  given  option  of  investing  money 
with  the  Company. 

Investment  Plan 

II.  Employees  and  the  Company  mutually  agree  as  fol- 

lows: 

(A)  Employee  agrees  to  invest  his  cash  distribu- 

tion in  the  Company. 

(B)  The   Company  agrees   to  pay    . .  %   interest 

(should  be  an  attractive  rate)  upon  invest- 
ment from  date  of  announcement. 

*Mr.  Trench  is  a  graduate  of  St.  Lawrence  University,  and  Is  con- 
nected with  the  executive  department  of  a  large  corporation. 


212 

(C)  Employee    agrees    to    leave    investment    in 

hands  of  the  Company  for  one  year. 

(D)  The   Company  agrees   to   put  these  invest- 

ments on  the  same  plane  of  security  as  its 
bonds. 

(E)  Employee   agrees  to  forfeit  interest   on  in- 

vestment if  he  leaves  employ  of  the  com- 
pany or  is  discharged  for  drunkenness  or 
*  *  *  during  the  course  of  the  year.  The 
amount  deposited  by  him  is  not  to  be  drawn 
out  until  the  end  of  the  year. 

(F)  The  company  agreed  to  permit  additions  by 

employee  to  his  investment  from  monthly 
wages  in  amounts  not  to  exceed  10%  of 
such  monthly  wages  and  not  less  than  one 
dollar  a  month. 

(G)  Provision  that  employee  in  discretion  of  Spe- 

cial Committee  at  each  factory  be  permit- 
ted to  draw  out  investment  in  cases  of  seri- 
ous illness,  disability  or  death. 

(H)  Agreement  may  be  cancelled  by  either  party 
at  the  end  of  the  year  or  renewed  for  com- 
ing year. 

Remarks. 

In  connection  with  the  provisions  of  the  Invest- 
ment plan,  which  are  meant  to  be  only  broadly  suggestive, 
many  details  will  have  to  be  carefully  worked  out.  For 
example,  some  arrangement  should  possibly  be  made  for 
appeal  by  the  workmen  in  cases  of  discharge. 

One  of  the  most  important  elements  in  the  success  of 
the  whole  plan  will  lie  in  the  statement  made  by  the 
company  at  the  time  of  distribution.  The  employees 
should  be  clearly  told  that  this  scheme  has  no  effect  upon 
the  maintenance  by  the  company  of  a  market  scale  of 
wages  in  all  departments. 


213 

Merits  of  Proposed  Extra  Wage  Distribution  and 

Investment  Plan. 

There  are  three  general  types  of  so-called  profit- 
sharing  plans  in  use,  namely : 

1.  Those  by  which  a  fixed  percentage  of  the  surplus 
profits  are  distributed  among  the  employees  annually 
according  to  some  mutual  agreement. 

2.  Those  by  which  the  employer  permits  his  em- 
ployees to  subscribe  to  stock  of  the  company  by 
means  of  small  monthly  contributions. 

3.  Those  by  which  the  employer  in  his  discretion 
annually  awards  to  his  employees  cash  or  stock  in 
the  company  in  addition  to  their  wages,  the  amount 
distributed  being  governed  by  the  amount  of  sur- 
plus profits  and  the  general  condition  of  business. 

To  these  types  may  possibly  be  added  the  ''Ford 
Plan,"  whereby  a  very  high  scale  of  wages  is  used  as 
the  method  of  distribution. 

It  will  be  at  once  observed  that  the  purposed  plan 
falls  within  the  third  class  of  plans. 

Economists  permit  only  the  first  class  to  be  designated 
"profit-sharing."  This  type  of  plan  was  eliminated  be- 
cause of  its  rigidity,  the  necessity  of  having  an  agree- 
ment between  employers  and  employees  of  the  nature 
of  a  partnership,  and  the  fact  that  it  takes  a  matter  from 
the  hands  of  the  directors  which  should  be  discretionary 
on  their  part  with  a  view  to  internal  and  external  busi- 
ness conditions. 

In  a  small  business  where  each  employee  could  clearly 
see  the  relation  of  his  efforts  to  the  ultimate  profits,  such 
a  plan  would  undoubtedly  be  beneficial. 

The  second  type  of  plan  was  eliminated  for  the  very 
good  reason  that  it  does  not  take  within  its  scope  every 
employee  nor  even  a  majority  of  the  employees.  This 
idea  of  stock  subscription  has  been  given  a  thorough  trial 
in  the  United  States  Steel  Corporation  and  less  than 
one-fourth  of  the  employees  are  participating  in  its 
benefits. 


214 

In  an  unmeasured  degree,  however,  this  plan  has  un- 
doubtedly been  an  asset  to  the  corporation  in  the  in- 
creased interest  and  good  will  of  those  who  have  pur- 
chased stock. 

The  ''Ford  Plan"  is  founded  essentially  upon  an 
extraordinary  internal  business  condition  and  on  its  face 
shows  its  impracticability  of  application.  It  is  also  bad 
economics  from  the  point  of  view  of  the  business  com- 
munity. 

The  special  distribution  plan  as  proposed  is  advisable 
for  the  following  reasons: 

1.  It  is  a  recognition  by  the  company  of  the  im- 
portant part  the  employees  have  played  in  the  at- 
tainment of  the  company's  industrial  position — a 
recognition  of  the  essential  justice  underlying  the 
profit-sharing  idea. 

2.  It  is  without  rigidity  and  places  the  matter 
where  it  should  be  placed  in  the  sound  discretion 
of  the  directors. 

3.  The  plan  takes  in  every  employee  of  the  company. 

4.  It  recognizes  the  value  to  the  company  of  con- 
tinuity of  service  and  tends  to  encourage  such  con- 
tinuity. It  is  the  almost  universal  report  of  em- 
ployers using  such  systems  that  its  workmen  remain 
for  longer  periods  of  employment. 

5.  The  provision  for  payment  four  months  after 
announcement  of  distribution  in  part  forestalls  a 
criticism  of  such  plans  that  the  workmen  plan  ex- 
penses and  even  go  in  debt  in  expectation  of  receiv- 
ing the  annual  distribution.  Under  this  scheme  an 
employee  would  hardly  run  up  such  expenses  until 
the  announcement  was  made. 

6.  The  inclusion  of  the  investment  plan  enables 
the  company  to  obtain  in  a  large  measure  the  advan- 
tages accruing  from  the  stock  subscription  plans  and 
at  the  same  time  encourages  the  spirit  of  thrift 
among  its  employees. 

7.  This  arrangement  for  a  secured  investment 
eliminates  the  criticism  that  employees  become  im- 
bued with  desire  for  speculation  and  further  that  the 
savings  of  the  employee  are  jeopardized  by  invest- 
ment in  stocks  having  a  fluctuating  value. 


215 


OPINIONS  OF  AMERICAN 
EMPLOYERS. 

lu  a  few  of  the  cases  examined  the  employers  are  very 
enthusiastic  over  the  success  of  their  profit  sharing  ven- 
tures. The  approval  of  a  considerable  number  is  in- 
dicated by  the  retention  of  their  plans  from  year  to  year. 

The  following  are  some  of  the  favorable  comments  of 
the  employers  in  their  own  words : 

1.  Promotes  more  continuous  service. 

2.  Nine  per  cent  reduction  in  the  cost  of  produc- 
tion. 

3.  Secures  more  regular  attendance. 

4.  Builds  up  confidence. 

5.  Eliminates  the  rolling  stones  and  encourages 
home  building. 

6.  Successful — never  had  a  strike. 

7.  Enables  company  to  keep   employees  during 
the  rush  season. 

8.  Creates  a  better  spirit  among  the  workmen. 

9.  Expenses  kept  down — salesmen  work  harder. 

10.  Tends  to  promote  efficiency  and  stimulate  en- 
deavor. 

11.  Promotes  regularity  of  employment. 

12.  Increases  effectiveness  and  profits  of  the  busi- 
ness. 

13.  Noticeable  increase  in  interest  and  loyalty  on 
the  part  of  those  retaining  their  stock. 

14.  Produces   greater   spirit   of  co-operation  be- 
tween employer  and  employee. 

15.  Great  benefit  in  securing  the  co-operation  of 
those  in  responsible  positions. 


216 

The  objections  to  the  profit  sharing  plans  as  stated 
by  the  employers  may  be  summarized  as : 

1.  Failure  of  employees  to  grasp  the  significance 
of  the  profit  sharing. 

2.  Dissatisfaction  on  the  part  of  the  employees 
when  the  profits  are  small. 

3.  Employees  count  on  bonus  payments  and  make 
use  of  them  in  advance. 

4.  Preference  on  the  part  of  employees  to  have 
their  wages  increased  instead  of  receiving  a  bonus. 

5.  The  sale  of  stock  to  outsiders  in  those  cases 
where  the  stock  is  distributed. 

6.  That  employees  learn  to  count  upon  such  dis- 
tributions and  their  living  expenses  increase  beyond 
their  wage  scale.     >■  vi  Ct^'^ 

VIEWS  OF  GEORGE  W.  PERKINS. 

Perhaps  no  man  in  this  country  interested  in  the  labor 
question  from  the  employer's  point  of  view  has  given 
the  subject  more  careful  study  or  practically  demonstrat- 
ed a  greater  desire  to  arrive  at  an  equitable  solution  of 
the  problem  than  George  W.  Perkins.  Whether  or  not  his 
ideas  are  susceptible  of  general  application,  the  argu- 
ments advanced  by  him  in  support  of  the  principle  of 
profit  sharing  may  be  considered  as  of  great  value  on  that 
side  of  the  question. 

His  views  were  very  fully  presented  in  an  address  de- 
livered by  him  before  the  National  Eetail  Dry  Goods 
Association  in  February,  1914.  Expressing  the  belief 
that  he  differs  radically,  with  reference  to  its  application 
and  results,  from  many  others,  he  said  in  part ; 

I  do  not  look  upon  profit-sharing  as  a  philan- 
thropy, form  of  benevolence,  on  a  par  with  gifts  at 
Christmas  or  bonuses  at  the  end  of  the  year.  No  self 
respecting  workingman  wants  something  for  noth- 
ing and  no  broad  minded  employer  can  afford  such 
an  arrangement. 


217 

The  kind  of  profit  sharing  which  is  genuine  pro- 
motes thorough,  efficient  co-operation  between  em- 
ployer and  employee,  the  same  as  that  practiced  be- 
tween partners  in  business. 

Close  observation,  coupled  with  considerable  ex- 
perience, has  convinced  me  that  practically  all  of  the 
many  failures  of  profit-sharing  plans,  both  in  this 
country  and  in  Europe,  have  occurred  because  at 
bottom  the  plans  were  not  honestly  devised  nor  equit- 
ably worked  out.  In  nine  cases  out  of  ten,  at  some 
point  in  the  practical  application  of  plans  that  have 
met  with  failure,  the  fact  has  developed  that  they 
were  not  mutually  beneficial;  they  either  did  not 
enhance  the  efficiency  of  the  men  in  such  a  way  as 
to  satisfy  the  employer  or  else  they  did  not  distribute 
profits  in  such  a  way  as  to  benefit  and  satisfy  the  em- 
ployees. No  partnership  where  profits  are  shared 
by  two  or  a  half-dozen  partners  could  last  any  length 
of  time  unless  mutually  beneficial,  and  therefore  no 
larger  partnership  where  profits  are  shared  can  ever 
be  expected  to  last  unless  mutually  beneficial.  No 
man  or  firm  or  corporation  that  is  thinking  of  adopt- 
ing profit  sharing  need  give  a  second  thought  to  it 
with  any  hope  of  success,  unless  prepared  to  ap- 
proach it  in  this  spirit  and  deal  with  the  subject  in 
an  absolutely  honest,  open  and  broad-minded  man- 
ner. 

The  relation  between  employer  and  employee  has 
changed  with  the  centuries.  Originally  it  was  owner 
and  slave;  then  it  was  master  and  man;  now  it  is 
employer  and  employee — each  stage  of  development 
bringing  the  employer  and  employee  into  closer  co- 
operation, minimizing  the  importance  of  the  employ- 
er and  enhancing  the  importance  of  the  employee. 
What  has  caused  this?  In  my  judgment  the  cause 
is  directly  traceable  to  the  vast  and  broad  educational 
forces  that  have  been  at  work  in  the  world. 

The  man  who  was  not  educated  nor  trained  to 
think  independently  struck  because  he  wanted  $2  a 
day  if  he  was  only  getting  $1.75;  and  for  quite  a 
period  of  time  labor  differences  were  settled  on  this 
basis.  But  it  is  my  deliberate  judgment  that  we  are 
rapidly  passino;  out  of  that  period  and  into  the  period 
where    our   laboring   people    are    already    so   well- 


218 

educated  and  so  able  to  think  independently  that, 
in  many  cases,  they  are  no  longer  simply  striking 
for  a  definite  increase  in  wages,  but  are  striking  for 
what  they  regard  as  a  fairer  proportion  of  the  prof- 
its of  the  business  in  which  they  are  employed.  If  I 
am  right  about  this,  then  we  are  rapidly  crossing 
the  line  from  the  period  where  labor  disputes  could 
be  settled  by  a  mere  increase  in  wage  and  are  enter- 
ing the  period  where  profit  sharing  in  some  form 
must  be  practiced.  Therefore,  the  question  is  how 
can  it  be  practiced,  and  practiced  effectively? 

A  good  many  years  of  actual  experience  have 
caused  me  to  become  very  optimistic  regarding 
profit-sharing  plans  worked  out  along  the  following 
lines :  Every  business  has  a  certain  amount  of  fixed 
charges.  Assuming,  of  course,  that  it  is  honestly 
and  fairly  capitalized,  it  must  earn  those  charges  be- 
fore any  profits  can  be  divided  among  partners  or 
stockholders.  Wages  and  salaries  are  paid  to  em- 
ployees in  exchange  for  service  that  is  supposed  to 
earn  at  least  the  fixed  charges  of  the  business.  I 
believe  that  this  should  be  taken  as  the  basis  of  profit 
sharing.  Almost  every  business  can  well  afford  to 
lay  down  the  principle  that  wages  and  salaries  are 
paid  to  earn  fixed  charges,  and  if  anything  is  earned 
above  fixed  charges  a  certain  percentage  of  such  sur- 
plus earnings  or  profits  should  be  allotted  to  the  em- 
ployees of  the  organization,  as  nearly  as  possible  in 
proportion  to  the  value  of  their  respective  efforts 
in  bringing  about  the  greater  success.  I  feel  strongly 
that  when  such  an  allotment  is  made  it  should  not  be 
paid  out  in  cash  to  the  employees,  but  should,  in  some 
way,  be  retained  in  the  business  for  a  certain  period 
of  time,  for  the  account  of  each  individual. 

Under  such  an  arrangement  each  employee  be- 
comes, as  nearly  as  possible,  a  working  partner 
in  the  concern;  for  if  the  concern  is  a  partnership 
with,  say,  four  or  five  members,  the  partners  them- 
selves draw  out  during  each  year  what,  in  a  way, 
might  be  called  salaries,  viz.,  approximately  the 
amount  of  money  necessary  to  meet  their  general 
living  expenses,  leaving  their  surplus  profits  in  the 
business — perhaps  every  few  years  withdrawing  cer- 
tain sums  of  money  to  invest  in  other  enterprises. 


219 

Any  partnership  or  profit-sharing  plan  that  divided 
up  profits  and  withdrew  them  in  cash  at  the  end  of 
every  year  could  not  last  very  long. 

Almost  all  profit-sharing  plans  have  divided 
profits  with  employees  on  a  cash  basis  and  turned  the 
money  over  to  the  employees  every  so  often,  usually 
once  a  year.  The  result  has  been  that  if  a  man  earn- 
ing $1,000  a  year  as  a  salary  received  $200  at  the  end 
of  the  year  from  a  profit-sharing  plan,  he  promptly 
lifted  his  living  expenses  from  a  $1,000  basis  to  a 
$1,200  basis,  and  began  to  look  upon  his  income  as  a 
$1,200  rather  than  a  $1,000  income;  and  the  extra 
$200  meant  nothing  to  him  so  far  as  increasing  his 
activity  or  heightening  his  intellectual  efforts  in  the 
business  was  concerned.  Then  if  a  period  came 
along  when  business  was  dull  or  poor  and  he  did  not 
get  the  extra  $200  he  would  find  fault  with  the  owners 
of  the  business  and  would  become  grouchy  and  in- 
clined to  lose  interest  in  his  work. 

If  he  was  thrift}^  and  did  not  use  the  $200  of  profit 
for  his  living  expenses,  but  saved  it,  then  he  would 
probably  invest  it  in  a  suburban  lot  or  some  stock 
that  was  recommended  to  him  or  in  something  that 
he  knew  little  or  nothing  about.  Presently  his  in- 
vestment would  begin  to  go  wrong  and  he  would 
begin  to  worry  about  it,  and  part  of  the  time  for 
which  he  was  receiving  pay  to  devote  to  the  business 
in  which  he  was  engaged  would  be  expended  in 
worrying  about  his  investment  in  the  business  in 
which  he  was  not  engaged ;  whereas  if  invested  in  the 
business  in  which  he  was  engaged  his  anxiety  might 
be  worth  while — might  be  of  some  practical  benefit 
not  onlv  to  himself  but  his  co-workers.  In  short, 
under  this  sort  of  profit-sharing  plan,  where  the  prof- 
its are  paid  out  in  cash,  very  little  real  substantial 
benefit  is  accomplished  except  such  as  may  have  come 
to  the  man  who  spent  his  money  in  his  home  and 
thus  provided  somewhat  better  living  conditions. 
There  is,  therefore,  a  weak  link  somewhere  in  such 
a  program,  and  the  weak  link  is  that  profit  sharing 
cannot  be  substantially  successful,  either  for  employ- 
er or  employee,  unless  coupled  with  profit  saving. 

Looking  at  it  from  the  viewpoint  of  capital,  the 
object  to  be  accomplished  through  the  adoption  of 


220 

profit  sharing  is  higher  efficiency  from  employees. 
Looking  at  it  from  the  standpoint  of  the  employee, 
the  object  to  be  accomplished  is  higher  and  more 
equitable  remuneration  for  services  rendered. 
Therefore,  any  profit-sharing  plan  that  fails  to  ac- 
complish both  of  these  results  breaks  down  sooner 
or  later. 

In  establishing  this  principle  it  is  all-important 
that  the  organization,  the  wage  and  salary  earners, 
know  in  advance  exactly  what  they  are  expected  to 
accomplish  each  year.  They  should  be  told  frankly 
at  the  beginning  of  each  year  how  much  money  it 
took  to  meet  fixed  charges  during  the  preceding 
year,  and  that  if  they  earn  certain  fixed  amounts, 
on  a  graded  scale,  over  and  above  said  fixed  charges, 
then  certain  percentages,  on  a  graded  scale  upwards, 
will  be  allotted  to  them.  This  offers  definite  goals 
for  an  organization  to  buckle  down  to  and  work  for, 
and  it  is  astonishing  how  such  an  offer  will  heighten 
the  esprit  de  corps  of  an  organization,  will  wipe  out 
little  petty  jealousies,  will  make  a  man  in  one  de- 
partment eager  to  pass  his  good  ideas  on  to  the  man 
in  the  next  department — all  vying  with  one  another 
to  accomplish  the  one  great  result.  Gradually  as  a 
number  of  men  in  the  organization  become  small 
owners  in  the  business,  you  broaden  and  deepen 
their  interest  in  their  work.  They  begin  to  think  of 
it,  speak  of  it,  work  for  it,  as  their  business,  not  your 
business  or  somebody  else's  business,  and  in  place 
of  "knocking"  it  they  praise  it. 

Many  people  have  said  to  me:  ''Oh,  but  it  takes 
a  long  while  for  a  man  who  is  only  saving  $10,  $20  or 
$100  a  year  to  acquire  much  of  an  interest  in  the  busi- 
ness in  which  he  is  engaged";  but  I  have  always 
found  that  such  a  criticism  is  made  without  sufficient 
thought  on  the  subject,  for  a  small  interest  means 
as  much  to  the  man  having  a  comparatively  small 
salar}^  as  does  a  large  interest  to  the  man  of  larger 
affairs  or  fortune. 

Among  the  advantages  of  this  way  of  profit  shar- 
ing are  the  following: 

First:  It  is  real,  it  is  genuine.  The  organization 
as  a  whole,  the  organization  individually,  has  a  defi- 
nite goal  for  its  year's  work.    It  knows  at  the  begin- 


221 

ning  of  a  year  how  much  money  must  be  earned  to 
cover  fixed  charges;  it  knows  that  it  is  being  paid 
salaries  to  earn  those  fixed  charges ;  it  knows  that  it 
shares  in  all  profits  over  and  above  fixed  charges, 
and  that  the  amount  of  such  profits  largely  depends 
on  the  individual  and  collective  effort  of  each  man 
in  the  organization.  This  in  itself  is  of  great  prac- 
tical value  to  the  business  from  a  dollar  and  cent 
standpoint.  There  is  no  philanthropy  about  it.  The 
men  have  certain  definite  goals  to  reach.  If  they 
reach  them  they  are  paid  a  definite  percentage  for 
doing  so.    It  is  a  definite  business  proposition. 

Second :  Having  reached  the  goals  set,  the  money 
over  and  above  the  salaries  they  are  paid — in  other 
words,  their  profits — are  invested  in  the  business  in 
which  they  are  engaged  and  on  which  their  whole 
time  and  thought  and  energy  should  at  all  times  be 
centered.  And  what  a  great  advantage  this  is  to  the 
employer,  and  what  a  spur  and  incentive  to  the  em- 
ployee! What  a  real,  genuine  interest  it  arouses  in 
the  worker  for  the  business  in  which  he  is  engaged. 
The  whole  atmosphere,  the  whole  relationship  is 
changed.  The  employer  can  think  less  about  wheth- 
er or  not  his  men  are  "soldiering"  on  him,  whether 
or  not  they  are  really  giving  to  their  work  the  best 
that  is  in  them;  and  the  employee  can  spend  much 
less  time  wondering  whether  or  not  he  is  being  prop- 
erly compensated.  The  whole  relationship  is  placed 
on  a  new  basis,  a  less  antagonistic  basis,  a  very  much 
more  co-operative  basis.  This  is  a  vastly  different 
plan  from  the  one  sometimes  practiced  by  which  one 
set  of  men  working  in  a  business,  viz.,  the  capitalists 
and  partners,  leave  their  profits  in  the  business, 
while  another  set  of  men  working  shoulder  to  shoul- 
der with  them,  viz.,  the  employees,  are  each  year 
taking  their  profits  out  of  the  business  and  putting 
them  somewhere  else. 

It  is  also  vastly  different  from  the  many  bonus 
schemes  in  vogue;  vastly  different  from  the  arbi- 
trary setting  aside  in  a  prosperous  year  of  a  cer- 
tain lump  sum  of  money  and  dividing  it  on  a  per- 
centage iDasis  among  the  employees.  Under  such 
arrangements  no  man  who  gets  any  of  the  money 
has  any  very  definite  idea  of  what  he  did  to  earn 


222 

it,  where  it  came  from  or  what  he  individually  can 
do  to  help  ensure  the  receiving  of  some  such  sum 
during  the  coming  year.  In  fact,  such  bonus  giving, 
very  erroneously  called  profit  sharing,  I  am  con- 
vinced has  done  a  great  deal  more  harm  than  good, 
for  in  many  instances  it  has  caused  employees  to 
feel  that  the  reason  they  were  receiving  said  bonuses 
was  because  the  business  was  earning  fabulous  sums 
of  money,  a  tiny  little  bit  of  which  was  thrown  to 
them  as  a  sop  to  make  them  feel  kindly  disposed  to- 
wards the  owners  or  to  ward  off  a  demand  for  a  gen- 
eral increase  in  wages.  In  short,  such  bonus  giving 
simply  stirs  up  rather  than  alleviates  trouble. 

Profit  sharing  on  the  basis  I  favor  is  sometimes 
objected  to  by  men  or  concerns  who  do  not  wish  to 
let  even  their  own  employees  know  how  little  or  how 
much  money  they  are  making  each  year.  To  such 
men  I  always  say — and  each  year  I  am  more  and 
more  certain  that  I  am  right  in  saying — that  they 
are  very  short-sighted  if  they  do  not  make  haste  to 
change  their  policy.  If  they  are  not  making  enough 
money,  if  the  business  is  running  on  a  close  margin 
each  year,  then  by  all  means  they  should  set  their 
situation  before  their  men,  adopt  such  a  profit-shar- 
ing plan  as  I  have  outlined,  and  get  the  genuine  co- 
operation of  every  single  man  in  lifting  their  profits 
and  putting  their  business  in  a  prosperous  condition. 

They  are  now  paying  wages  and  salaries,  and 
many  a  night  they  go  home  wondering  whether  the 
employees  are  really  earning  their  salaries.  Under 
such  a  profit-sharing  plan  as  I  have  outlined  they 
have  a  substantial  guarantee  that  the  salaries  will  be 
earned,  because  in  aiming  to  share  in  profits  over 
and  above  fixed  charges  the  men  are  all  the  more  cer- 
tain to  earn  at  least  the  fixed  charges ;  in  fact  such  a 
plan  goes  a  long  way  towards  ensuring  the  earning 
of  fixed  charges.  And  would  any  proprietor  or  man- 
ager hesitate  to  pay  a  handsome  premium  each  year 
for  a  blanket  policy  guaranteeing  that  every  em- 
ployee in  the  business  would  have  the  business  on  his 
mind  and  work  as  hard  for  its  success  as  the  manager 
or  proprietor  does? 

As  for  the  man  who  is  making  so  much  money 
that  he  is  afraid  to  let  even  his  own  employees  know 


223 

how  much  he  is  making,  to  that  man  I  say  that  he  is 
the  type  of  man  who,  more  than  any  other,  is  re- 
sponsible for  the  serious  differences  existing  between 
capital  and  labor;  for  with  the  growing  intelligence 
of  the  masses,  how  can  he  expect  such  a  condition  to 
continue!  It  is  unnatural  in  the  first  place,  and 
wrong  in  the  second  place ;  and  every  year,  yes,  every 
day,  makes  it  clearer  and  clearer  that  such  conditions 
will  no  longer  be  tolerated  and  must  speedily  pass 
away. 

The  day  of  secretive  methods  is  rapidly  passmg. 
The  day  of  publicity  is  rapidly  approaching. 

One  reason  why  a  man  who  is  making  handsome 
profits  does  not  want  to  publish  them  or  let  any  one 
know  about  them  is  the  fear  of  his  competitors.  An- 
other reason  is  that  he  wants  to  put  those  large  prof- 
its away  for  a  rainy  day  when  business  may  not  be  so 
good.  Such  a  man's  best  protection  against  his  com- 
petitors is  an  organization  of  the  highest  possible 
efficiency.  Every  day  efficiency  of  organization  be- 
comes more  and  more  important;  indeed  I  believe 
that  to-day  it  is  more  important  than  capital,  for  with 
efficiency  a  man  can  get  capital,  but  capital  alone 
does  not  necessarily  put  efficiency  into  a  business. 

I  am  convinced  that  labor  is  entirely  willing  that 
capital  should  have  its  fair  reward  and  proper  pro- 
tection, but  in  this  country  we  have  had  too  many 
instances  where  capital  has  taken  extortionate  re- 
ward, and  one  of  the  main  reasons  why  the  serious 
problems  confronting  us  to-day  are  so  difficult  of 
solution  lies  in  the  fact  that  too  many  men  of  capital 
are  arrogant  and  unreasonable  and  are  absolutely 
unwilling  to  look  with  sufficient  care  and  fairness 
into  the  causes  that  are  producing  the  views  and 
opinions  so  largely  held  by  our  people  at  this  time. 

As  for  putting  aside  his  big  profits  as  a  guarantee 
against  the  future,  he  had  better  use  some  of  them  in 
more  deeply  interesting  his  men  in  his  business,  do- 
ing this  to  such  an  extent  that  if  the  dark  days  come 
he  will  be  as  nearlv  certain  as  possible  that  they  will 
stand  by  the  business  in  a  way  that  capital  alone 
never  can. 

Profit  sharincr  on  the  basis  I  favor  is  also  some- 
times objected  to  by  concerns  whose  securities  are 


224 

closely  held.  There  are  many  ways  to  obviate  this 
difficulty.  Many  concerns  can  increase  their  capital. 
Others  that  cannot,  or  that  cannot  do  so  for  a  time, 
can  obviate  the  difficulty  by  issuing  certificates  of 
participation  which  will  draw  the  same  percentage  of 
profit  as  the  regular  securities  of  the  business.  In 
other  words,  where  there  is  genuine  desire  a  way  can 
always  be  found. 

While  this  profit-sharing  partnership  can  be 
more  readily  accomplished  in  a  large  business,  never- 
theless, if  approached  in  the  proper  spirit,  it  can  also 
be  successfully  accomplished  in  a  small  business; 
and  if  applied  generally  would  remove  to  a  consider- 
able degree  the  dangers  that  are  menacing  modern 
industry,  and  which  are  largely  caused  by  the  feeling 
on  the  part  of  the  masses  that  they  are  not  getting 
their  proper  proportion  of  earnings  through  wages. 

Remarks  of  Chaeles  M.  Schwab. 
(Address  before  Aldine  Club,  New  York,  Feb.  16,  1916.) 

He  pointed  out  that  ''Brains  are  a  bigger  asset  than 
money,"  and  said:  *'I  believe  in  profit  sharing  with 
department  heads  and  with  workmen  who  by  their  per- 
sonal efforts  add  to  the  profits  of  an  enterprise  by 
economies  or  increased  output.  If  an  employee  can  by 
his  own  efforts  add  to  the  concern's  prosperity,  he  should 
share  in  that  prosperity. ' ' 

He  stated  that  his  idea  of  proper  management  was 
to  give  the  individual  some  important  part  in  the  indus- 
try to  stimulate  his  interest,  and  that  that  made  the  mana- 
ger feel  that  he  was  the  prime  factor  in  the  enterprise.  "If 
that  is  true  of  the  manager  and  the  salesman,  it  is  equally 
true  of  the  laborer,"  he  continued.  ''In  every  establish- 
ment of  mine,  I  carry  out  this  principle  and  put  aside 
15%  for  this  purpose  before  apportioning  the  profits. 
The  success  of  any  big  undertaking  or  industry  in  the 
future  would  depend  on  this  profit-sharing  scheme  he 
had  applied,"  he  declared.  It  is  a  cash  distribution,  based 
upon  results  obtained. 


<( 


225 

**It  has  been  the  gratification  of  my  life,"  he  added, 
that  I  have  been  able  to  make  money  for  young  men 
by  bringing  out  of  them  their  latent  possibilities,"  and 
stated  further  that  "Paying  bonuses  amounting  to 
$5,000,000  a  year  is  of  little  concern,"  and  that  one  vice- 
president  had  been  given  $600,000  in  addition  to  his  sal- 
ary in  1915,  while  another  assistant  had  received  more 
than  $1,000,000  as  his  share  of  the  profits. 

Wm.  F.  Donovan. 

President  Atlas  Tack  Company, 
fairhaven,  mass.    feb.  25,  1916. 

"We  have  no  system  of  profit  sharing  except  the  profit 
which  is  gained  by  piece  workers  and  those  to  whom 
we  give  a  bonus. 

We  do  not  believe  in  profit  sharing  in  the  sense  in 
which  it  is  generally  understood,  and  our  conclusion  is 
based  upon  the  writer's  experience  with  a  profit — or, 
more  correctly,  a  gain-sharing  plan  in  which  the  rank 
and  file  received  a  certain  proportion  of  the  gains,  the 
heads  of  departments  a  certain  portion,  and  the  remain- 
der was  retained  by  the  company  which  had  the  plan  in 
force.  It  did  not  operate  satisfactorily,  and  was  aban- 
doned for  that  reason,  as  it  offered  no  satisfactory  incen- 
tive to  the  rank  and  file. 

If  a  plan  could  be  devised  by  which  an  equitable  dis- 
tribution of  a  portion  of  our  profits  could  be  made,  we 
would  be  disposed  to  favor  it;  but  we  believe  that  the 
profits  should  be  shared  only  with  those  who  make  an  ex- 
ceptional effort  to  gain  them,  and  where  profits  are  dis- 
tributed upon  a  percentage  basis — that  is  to  say,  a  per- 
centage of  the  wages  paid  to  the  workers — it  offers  no 
incentive  to  the  individual  who,  if  he  is  intelligent,  will 
realize  that  his  individual  effort  in  a  large  organization 
will  not  have  an  appreciable  effect  upon  the  general  re- 
sult, and  he  has  no  assurance  that  an  equal  or  correspond- 
ing effort  will  be  made  by  his  fellows  if  he  were  inclined 
to  make  an  exceptional  effort  himself. 


226 

Profits  should  not  be  shared  unless  an  exceptional 
effort  is  made  by  the  beneficiaries  to  earn  them.  Other- 
wise, the  employer  who  pays  the  full  market  price  for 
the  kind  of  labor  which  he  is  employing  has  done  his  full 
duty  to  it.  Consequently,  we  believe  that  efficiency  only 
should  be  recognized,  either  by  increased  direct  compen- 
sation, or  by  some  other  equally  satisfactory  method  such 
as  piece  work,  premium  or  bonus." 

Heebert  M.  Lloyd. 

New  York,  Feb.  21,  1^16. 
(Name  of  company  withheld  because  plan  new). 

The  subject  is  a  puzzling  one  and  according  to  my 
experience  employers  are  much  more  concerned  than  em- 
ployees in  the  matter,  and  it  is  very  difficult  to  see 
whether  they  get  value  for  what  they  spend  in  that  di- 
rection or  not. 

A  manufacturing  company,  of  which  1  am  a  director, 
is  now  trying  a  new  line,  that  is,  new  to  us  and  differing 
slightly  from  anything  else  in  practice  that  we  have 
seen. 

It  has  been  our  custom  for  some  years  to  give  bonuses 
at  New  Year's  to  foremen  and  others  based  in  a  rough 
way  on  the  work  of  their  departments,  and  the  total 
amount  of  the  bonuses  being  a  percentage  of  the  profits 
of  the  concern.  This  year  we  have  changed  that,  and 
instead  of  cash  gave  them  passbooks  on  a  "  Co-operative 
Savings  Fund."  They  can  withdraw  these  deposits  if 
they  see  fit,  or  can  add  to  them  from  their  own  funds 
precisely  as  in  a  savings  bank.  So  far  there  have  been 
more  new  deposits  than  withdrawals.  The  company 
guarantees  five  per  cent  on  these  deposits  and  if  it  pays 
dividends  in  excess  of  five  per  cent  will  make  the  rate  on 
the  deposits  equal  to  its  dividend  rate.  At  present  this 
rate  is  seven  per  cent.  How  it  will  work  we  are  much  in- 
terested to  know,  but  the  hope  is  that  each  of  the  men 
will  now  feel  a  sense  of  ownership  in  the  plant.     This 


227 

plan  may  not  be  ideal  but  it  seemed  to  us  a  good  way  of 
working  out  the  cash  bonus  scheme  which  no  doubt 
had  done  us  no  harm  but  as  far  as  we  could  see  did  us 
no  particular  good.  The  men  participating  in  the  divi- 
dend fund  amount  to  eight  per  cent  of  the  total  employ- 
ees (15%  of  the  men)  and  of  course  are  the  best  paid 
and  most  intelligent. 

(1)  Our  plan  calls  for  a  cash  distribution  with  option 
of  investment  parallel  to  stock  but  not  in  stock,  the 
amount  in  either  case  being  based  upon  company's  profits 
and  record  of  man's  work  during  the  year.  See  memo- 
randum below. 

(2)  Cash  distribution  without  option  was  begun  1904, 
option  in  1916. 

(3)  Includes  heads  of  departments,  assistants  to 
heads,  and  office  men. 

(4)  400  employees  of  whom  about  200  are  women.  30 
participants,  all  men. 

(5)  It  has  created  some  good  feeling,  but  good  effect 
probably  small  and  difficult  to  appraise. 

(6)  Modified  1916  as  shown  below. 

Memorandum. 

For  12  years  past  it  has  been  our  custom  to  give  ta 
each  foreman  and  to  a  few  others  in  important  positions 
New  Year  checks.  The  total  distribution  was  a  fixed 
percentage  of  the  profits  of  the  Company,  while  the  shares 
were  figured  with  reference  to  the  amount  of  work  and 
supposed  efficiency  of  the  particular  department.  With 
each  check  was  sent  a  brief  letter  from  the  Treasurer 
explaining  the  method  of  computation  but  not  stating 
what  percentage  of  profits  was  distributed.  The  busi- 
ness has  been  a  growing  one,  hence  both  the  number  of 
participants  and  the  amounts  of  the  individual  checks 
have  had  an  upward  tendency. 

Some  years  ago,  in  recognition  of  a  notable  service, 
we  gave  one  man  in  addition  to  his  annual  check  a  certifi- 


228 

cate  for  a  few  shares  of  stock,  and  found  that  he  at- 
tached much  more  importance  to  this  than  to  an  equiva- 
lent amount  of  money.  This  incident  confirmed  the  idea, 
already  entertained,  that  it  would  be  helpful  if  we  could 
give  the  men  something  not  to  be  spent  but  to  be  kept. 
We  did  not  wish  to  give  them  stock,  because  there  was 
no  open  market  for  it,  and  there  was  some  risk  that  we 
did  not  wish  them  to  take,  and  because  our  shares  being 
hundred  dollar  shares  and  most  of  the  checks  being  of 
amounts  under  $100  each,  the  delivery  of  stock  would  be 
complicated  and  difficult  for  some  to  understand. 

Accordingly  we  established  in  January,  1916,  what 
we  call  our  Co-operative  Savings  Fund,  on  the  following 
plan : 

I. 

A  Bonus  List  is  established,  including  all  foremen 
who  received  Bonuses  in  1915  and  also  certain  office  em- 
ployees and  others,  the  length  and  value  of  whose  service 
entitle  them  to  recognition.  The  executive  committee 
will  make  up  the  list  at  an  early  date,  and  may  add  and 
withdraw  names  at  any  time. 

All  on  the  new  list  on  February  1,  1916,  will  receive 
Bonuses  out  of  the  Company's  profits  of  1915. 

II. 

All  Bonuses  will  hereafter  be  paid  in  Pass  Book  Cred- 
its, but  with  the  right  to  withdraw  all  or  any  part  forth- 
with as  below  provided. 

III. 

Everyone  on  the  list  and  every  person  whom  the  com- 
pany may  admit  to  the  fund  will  receive  a  pass-book  in 
which  his  bonuses  and  any  other  moneys  he  may  deposit 
with  the  fund,  and  as  well  all  dividends  on  credits,  will  be 
entered. 

IV. 

All  credits,  whether  from  bonuses  or  other  sources, 
may  be  withdrawn  at  any  time. 


229 

V. 

The  company  will  guarantee  all  pass-book  credits, 
and  also  the  payment  thereon  of  an  annual  dividend  at 
the  highest  rate  paid  on  any  class  of  its  stock.  At  pres- 
ent it  pays  7%  on  Preferred  Stock  and  6%  on  Common. 
Should  dividends  be  suspended  or  reduced  it  will  at  any 
rate  pay  5%  on  pass-book  credits. 

VI. 

The  Fund  will  be  invested  in  the  Company's  Mort- 
gage Bonds,  other  First  Mortgages  on  the  Company's 
property,  or  its  Preferred  Stock.  The  earnings  will  be 
applied  on  the  dividends  and  the  Company  will  make  up 
the  difference. 

VII. 

Any  one  ceasing  to  be  employed  by  the  Company 
ceases  to  be  a  member  of  the  Fund  and  must  withdraw 
his  account  unless  the  Company  consents,  as  in  case  of 
disability,  to  continuance. 

The  Company  reserves  the  right  to  determine  the 
membership  of  the  Fund,  to  limit  the  amount  of  deposits, 
and  also  to  discontinue  the  plan  altogether  at  the  end  of 
any  year,  in  which  case  it  shall  forthwith  cash  all  de- 
posits. 

v:ii. 

The  Fund  shall  be  administered  by  a  Committee  of 
Five  Depositors,  all  of  whom  shall  be  named  by  the  Com- 
pany for  the  first  yea,r.  After  the  first  year  the  De- 
positors shall  elect  Three  members  of  the  Committee  and 
the  Company  shall  n-ame  the  remaining  two. 

The  Committee  shall  audit  accounts,  fix  rules  and 
times  for  receiving  deposits  and  paying  withdrawals, 
select  investments,  and  make  other  reasonable  regula- 
tions. 

This  plan  was  put  in  operation  by  the  delivery  of  the 
pass-book  to  each  depositor  by  the  Treasurer  of  the 
Company,  with  oral  explanation.    As  a  rule  only  one  de- 


230 

positor  was  called  to  the  Treasurer's  office  at  a  time.  It 
should  be  added  that  most  of  the  men  have  been  for  con- 
siderable periods  with  the  Company.  In  explaining  the 
plan,  stress  was  laid  on  the  desire  of  the  Company  that 
the  men  should  have  and  feel  an  actual  ownership  in  the 
concern,  but  without  the  risks  of  stockholding.  So  far  as 
could  bejudged  it  was  extremely  well  received.  One  man, 
for  example,  said  the  feeling  of  being  one  of  the  Com- 
pany was  worth  more  to  him  than  any  dividend.  Two 
have  drawn  out  their  bonuses  in  cash,  but  this  is  more 
than  offset  by  new  deposits  made. 

The  Company  members  of  the  Committee,  being  the 
Vice-President  and  the  Treasurer,  have  qualified  by  be- 
coming depositors  of  their  own  funds,  but  only  in 
nominal  amounts. 

AMERICAN  ELECTRIC   RAILWAY  ASSOCIATION. 

The  American  Electric  Railway  Association's  Com- 
mittee on  Welfare  of  Employees  in  discussing  co-opera- 
tion in  their  1912  report  said : 

''Probably  the  most  advanced  step  in  co-opera- 
tion is  that  of  sharing  profits  with  the  employee. 
This  puts  him  on  a  footing  with  the  stockholders  of 
the  corporation,  and  has  the  faculty  of  creating  in 
him  a  close  personal  interest  in  the  company's  pros- 
perity. He  feels  that  the  larger  the  profits,  the 
larger  will  be  his  share,  and  he  will  be  most  exact- 
ing for  economies  in  operation  and  care  of  company 
property  both  on  his  own  part  and  that  of  his  fellow 
employees.  Various  forms  of  profit  sharing  have 
been  tried  or  are  in  vogue,  the  earliest  of  which  was 
put  into  effect  in  Denver  in  1898  when  the  company 
divided  with  the  men  any  excess  over  certain  daily 
receipts.  The  next  year  at  Columbus,  Ohio,  the  same 
rate  of  dividend  was  paid  upon  wages  as  was  paid 
upon  the  company's  stock.  Two  years  later  at  De- 
troit the  company  purchased  its  own  stock  in  the 
open  market  and  allowed  its  employees  to  buy  it  at 
the  same  figure,  paying  for  it  in  instalments  of  $5 
a  month.    In  1902  in  British  Columbia  one-third  of 


231 

all  surplus  remaining  after  a  4  per  cent  dividend 
was  paid  to  stockholders  was  divided  among  the  em- 
ployees. In  1909  at  Spokane,  Washington,  stock  was 
sold  to  employees  on  easy  terms,  while  the  company 
at  Decatur,  Indiana,  had  for  some  time  hired  no 
trainmen  who  would  not  purchase  one  share  of  stock 
and  subscribe  for  five  more.  It  was  claimed  that  the 
latter  practice  created  among  employees  such  an  in- 
terest in  the  company's  welfare  that  no  unavoidable 
accidents  had  occurred  since  its  adoption,  and  that 
while  some  good  men  may  have  been  kept  out  of  the 
service,  the  number  excluded  was  small  and  the  com- 
pany was  kept  free  from  the  shiftless  ones  who  were 
most  likely  to  be  careless." 

W.  D.  Mahon,  International  President,  Amalgamated 
Association  of  Street  and  Electric  Railway  Employees  of 
America,  writes : 

''With  regard  to  'The  Attitude  of  the  American 
Electric  Railway  Association,'  I  note  the  profit-shar- 
ing propositions  that  are  described  therein.  I  am 
not  familiar  with  the  Denver  or  Columbus  methods. 
I  know  from  personal  experience  that  the  employees 
in  Columbus  are  hardly  making  enough  to  keep  soul 
and  body  together,  and  they  surely  are  in  need  of 
some  of  the  profits  of  that  company.  As  to  the  state- 
ment that  the  Detroit  company  purchased  its  own 
stock  in  the  open  market  and  allowed  its  employees 
to  buy  at  the  same  figure,  paying  for  it  in  instalments 
of  $5  a  month,  I  would  say  that  that  occurred  some 
years  ago,  but  there  was  nothing  developed  or  came 
of  it.  The  stock  wasn't  worth  much,  some  few  of 
the  men  bought  a  little  of  it,  and  then  the  proposition 
dropped,  and  no  one  has  paid  any  attention  to  it  for 
a  number  of  years,  and  I  doubt  if  there  are  ten  of  the 
employees  that  have  purchased  any  of  the  stock.  As 
to  the  British  Columbia  plan,  it  is  true  that  in  1902 
the  street  railways  of  Vancouver,  Westminster  and 
Victoria  were  owned  and  operated  by  the  same  com- 
pany, and  it  did  inaugurate  profit  sharing,  not  one- 
third  of  the  surplus  after  the  company  had  paid  a 
dividend  of  4  per  cent  but  one-fourth.  This  was  in 
operation  for  about  four  years,  not  to  exceed  six,  and 


232 

then  discontinued.  It  was  agreed  between  the  com- 
pany and  the  employees  that  the  amount  going  to 
them  by  this  profit-sharing  method  was  nothing  but 
a  wage,  and  it  was  dropped  entirely.  As  to  Spokane, 
I  am  not  familiar  with  that,  nor  with  Decatur,  In- 
diana. Decatur  is  a  very  small  place,  and  there 
couldn't  be  much  there  to  share  with  any  one.  In 
Spokane  the  company  had  opposed  the  organization 
of  their  men  in  every  shape  and  form,  and  if  they 
would  share  with  them  a  little  of  the  liberties  that 
are  enjoyed  by  the  other  workmen  of  the  country, 
and  give  them  the  right  to  organize  and  speak  for 
themselves  in  wage  contracts  and  conditions  of  that 
kind,  it  would,  I  imagine,  be  worth  more  than  any 
profit-sharing  plan  that  may  have  ever  been  in- 
augurated." 


233 


ATTITUDE  OF  THE   TRADE  UNIONS 

So  far  as  organized  labor  is  concerned,  it  is  generally 
opposed  to  all  profit-sharing  schemes. 

Theoretically,  one  would  suppose  that  there  could  be 
no  possible  objection  to  the  periodical  cash  distribution 
of  a  percentage  of  the  profits,  and  yet  general  criticisms 
on  the  part  of  the  employees  are: 

That  market  wages  are  not  paid  where  such 
cash  distributions  are  made; 

V-That  they  prefer  to  have  a  fixed  wage  scale  upon 
which  they  can  count;  and 

\  That  when  such  percentages  of  profits  are  re- 
ceived they  are  regarded  as  gifts,  which  place  the 
workers  under  obligation  to  the  employer  and  in  a 
position  in  which  they  cannot  ask  for  increases  in 
wages  or  salaries  to  which  they  may  be  justly  en- 
titled. 

In  relation  to  stock-selling  plans,  some  of  the  criti- 
cisms are : 

!  That  foremen  will  keep  down  the  wages  of  the 
rank  and  file  in  order  that  the  dividends  on  stock 
owned  by  the  foremen  may  be  higher; 

VThat  the  aim  of  the  company  in  selling  stock  is 
sometimes  circumvented,  as  in  the  case  of  the  North- 
em  Pacific  Company,  which  experienced  disappoint- 
ment because  the  stock  was  sold  to  the  employees  at 
a  low  price  and  when  it  rose  the  employees  promptly 
sold  it  instead  of  remaining  participators ;  and 
2,  That,  although  stock  may  be  sold  on  the  instal- 
ment plan,  comparatively  few  in  the  rank  and  file 
can  afford  to  take  advantage  of  such  opportunities; 


\ 


234 

/  Then  there  is  the  question  of  possible  loss  by  a 
company  in  any  given  year  and  that  employees  who 
are  owners  of  stock  are  likely  to  become  interested 
in  watching  the  market  and  to  cultivate  the  gambling 
instinct. 

TYPICAL  COMMENTS. 

Samuel  Gompeks,  President,  American  Federation  of 
Labor  says ; 

''This  proposition  has  never  been  seriously  con- 
sidered by  the  organizations  of  labor.  I  desire  to 
say  further  that  it  has  come  under  my  observation 
that  some  employers  who  have  inaugurated  systems 
of  so-called  profit  sharing  have  pared  down  the 
wages  of  their  employees  so  that  the  combined  shar- 
ing of  profits  and  their  wages  did  not  equal  the  wages 
of  employees  of  other  companies  in  the  same  line  of 
industry.  What  we  are  especially  interested  in  more 
than  profit  sharing  is  a  fair  living  wage,  reasonable 
hours  and  fair  conditions  of  employment. 


>  J 


John  F.  Tobin,  President  of  the  Boot  and  Shoe 
Workers'  Union,  states  that  in  his  opinion  profit-sharing 
schemes  are  intended  to  wean  employees  away  from 
unions  so  that  they  may  not  be  in  a  position  to  bargain 
collectively  for  wages,  hours,  and  other  conditions  for 
which  trade  unions  stand. 

John  P.  Freiy,  Editor,  International  Holders'  Jour- 
nal, states  that  his  experience  prompts  him  to 
say  that  in  almost  eveiy  instance  profit-sharing  schemes 
operate  to  pay  the  workers  a  lower  wage  in  pro- 
portion to  their  output,  to  make  trade  union  organiza- 
tion most  difiicult  if  not  impossible,  and  to  make  it  diffi- 
cult to  bring  about  a  condition  where  the  workers  can 
take  up  the  question  of  their  terms  of  employment  as  an 
organized  body. 

J.  C.  Skemp,  Grand  Secretary-Treasurer,  Brother- 
hood of  Painters,  Decorators  and  Paperhangers  of 
America : 


235 

**  Profit  sharing  as  practiced,  at  its  best,  is  an  in- 
adequate and  unsatisfactory  remedy  for  our  indus- 
trial ills.  Where  the  experiment  is  made  in  good 
faith  the  facts  that  the  employer  reserves  the  right 
to  discharge  a  workman  at  any  time,  that  he  fixes  the 
worker's  share  of  the  profits  and  that  the  worker  has 
no  voice  in  the  management  of  the  business,  rob  the 
plan  of  any  value  it  otherwise  might  have. 

"The  dividend  to  the  workman  is  merely  a  gift 
to  be  made  or  withheld  at  the  will  or  the  whim  of  the 
employer — disguised  charity.  As  usually  employed 
it  is  a  method  for  bribing  the  workman  to  remain  out- 
side of  the  union  of  his  craft,  to  discourage  demands 
for  better  wages,  to  stimulate  output  and  increase 
profits  for  the  employer,  the  workman  to  receive  a 
small  share  of  his  increased  earnings. ' ' 

Andrew  J.  Furuseth,  President,  International  Sea- 
men's Union  of  America: 

"Profit  sharing  is  a  truce  that  the  employers 
seldom  enter  into  except  with  the  purpose  of  holding 
the  wages  down.  You  cannot  get  any  arrangement 
with  the  employers  unless  you  are  strong  enough  to 
compel  them  to  pay." 

H.  B.  Perham,  President,  Order   of   Railroad    Tele- 
graphers : 

"Wage  earners  are  entitled  to  what  they  have 
earned  as  soon  as  their  day's  work  is  done  and  they 
are  not  entitled  to  any  more.  A  cash  distribution 
annually  means  that  the  money  has  been  withheld 
from  them." 

Thomas    J.    Donnelly,    Secretary-Treasurer,    Ohio 
State  Federation  of  Labor: 

"If  there  is  a  profit  to  give,  it  should  be  given 
daily  and  weekly  in  reducing  hours  and  increasing 
wages." 

H.  J.  Conway,  Secretary-Treasurer,  Retail  Clerks '  In- 
ternational Protective  Association,  says: 

"In  regard  to  what  is  called  today  stock  holding 
or  stock  ownership,  from  the  viewpoint  and  experi- 


236 

ence  we  have  had  with  it  through  our  association, 
instead  of  being  in  favor  of  it,  we  condemn  it  as 
being  non-beneficial  to  employees  in  the  retail  indus- 
try, in  so  far  as  the  past  plans  at  least  have  proven. 
We  have  found  that,  in  the  greater  number  of  in- 
stances which  came  directly  before  us,  the  plan  was 
brought  into  effect  primarily  for  the  purpose  either 
of  preventing  or  breaking  strikes,  should  any  arise 
in  an  attempt  to  secure  a  changed  working  condi- 
tion for  the  betterment  of  the  employees. 

"Plausible  stories  are  brought  forth  in  the  guise 
of  an  increased  wage  through  the  profits  derived 
from  being  a  stockholder  but  so  far  as  we  have  any 
information,  and  we  have  given  a  great  deal  of 
thought  to  the  subject  matter,  no  profits  have  been 
received.  On  the  contrary,  those  who  have  invested 
or  were  presumed  to  be  given  the  stock  payable  from 
the  profits  derived  from  the  business  have  never  been 
able  to  realize  any  benefit  therefrom ;  and  those  who 
paid  part  of  it  have  great  difficulty,  when  the  occasion 
arises,  to  sever  their  relations  with  the  employer  or 
the  stock  concern,  and  to  dispose  of  their  stock,  either 
at  a  profit  or  at  the  price  which  they  had  paid. 

"It  has  also  been  a  means  to  retard  the  advance- 
ment of  employees  through  the  securing  of  more 
profitable  employment  for  once  inveigled  into  it, 
the  many  bright  spots  in  the  future  constantly  kept 
before  their  minds  create  a  hope  that  at  some  day 
results  will  come.  They  hesitate  to  change  their  po- 
sitions when  opportunity  arises  through  which  they 
could  gain  increased  wages  and  possibly  more  con- 
genial employment. 

"As  a  matter  of  developing  efficiency,  there  is  some 
claim  that  that  was  the  paramount  cause  of  its  insti- 
tution. Nothing  so  far  has  been  developed,  through 
being  a  stock  holder  or  a  stock  owner  or  a  participant 
in  gratuities  through  stock  ownership,  that  has  ad- 
vanced efficiency  one  iota.  We  know  of  a  number 
of  instances  in  which  it  was  brought  about  wholly  for 
the  purpose  of  preventing  the  making  of  agreements 
for  improved  working  conditions,  where  it  was  used 
as  an  effective  weapon  to  ensure  retaining  in  their 
employ,  if  a  strike  were  called,  a  sufficient  number  to 
wait  upon  trade. 


237 

"Instances  have  recently  come  under  our  observa- 
tion in  which  an  employee  would  be  tendered  a  cer- 
tificate of  stock  to  the  amount  of  $500  without  a  dol- 
lar being  paid  on  same,  but  a  generous  bank  would 
accept  the  certificate  and  a  personal  note  from  the 
employee  for  the  loan  of  the  $500  to  pay  for  the  stock. 
In  one  instance,  the  employee,  on  leaving,  had  no 
trouble  in  disposing  of  his  stock  because  he  simply 
turned  it  in. 

"In  our  estimation,  the  only,  the  best  and  most 
profitable  participation  in  the  benefits  of  employment 
as  employees  is  through  the  weekly  or  monthly  wage 
being  increased  sufficiently  to  make  it  a  saving  wage 
and  not  something  of  a  lure  to  inveigle  the  employees 
into  a  non-participating  proposition.  And  so  we  are 
unutterably  opposed  to  the  stock  ownership  or  the 
profit-sharing  propositions  as  they  are  now  being 
advanced  in  the  country. ' ' 

John  Fitzpatrick,  President,  Chicago  Federation  of 
Labor : 

"For  my  part,  I  think  these  schemes  are  all  totally 
bad  and  are  no  more  nor  less  than  a  fraud,  a  decep- 
tion and  a  snare.  .  .  .  The  slogan  of  the  Ameri- 
can labor  movement,  'A  fair  day's  pay  for  a  fair 
day's  work,'  is  the  manly,  human,  honest,  fair  way 
of  meeting  the  question  of  work  and  wages.  A  fair 
day's  pay  would  involve  decent  standards  of  living,  a 
comfortable  home,  sufficient  for  proper  recreation 
and  enjoyment  and  the  things  that  make  this  life 
worth  living.  It  would  mean  proper  safeguards  to 
conserve  the  ability  of  the  breadwinner  and  enable 
him  to  continue  for  the  longest  period  of  time  to  pro- 
vide for  and  protect  himself,  his  home  and  his  loved 
ones." 

Walter  W.    Drayer,    General     Secretary-Treasurer, 
Journeymen  Stone  Cutters'  Association: 

"A  cash  distribution  or  a  bonus  is  usually  given 
with  the  understanding  that  employees  are  not  to 
affiliate  themselves  with  a  labor  organization.  Such 
being  the  case,  employees  must  take  employment  at 


238 

the  wages  offered  by  the  employers  rather  than  col- 
lectively establishing  a  wage  for  their  labor." 

"In  most  cases  it  is  a  form  of  involuntary  servi- 
tude inasmuch  as  such  cash  distribution  is  denied 
those  employees  who  might  wish  to  terminate  their 
employment  to  better  their  conditions.  They  are 
denied  this  cash  distribution  if  they  leave  their  em- 
ployment before  a  stated  period." 

James  Wilson,  General  President,  Pattern  Makers' 
League : 

''These  systems  prevent  men  from  organizing  and 
thereby  an  employee  works  for  less  wages — all 
bonuses  included — than  he  would  receive  if  he  were 
organized. ' ' 

.  C.  F.  QuiNN,  Secretary-Treasurer,  Pennsylvania  State 
Federation  of  Labor : 

"It  is,  as  the  children  have  it  in  their  play:  'Open 
your  mouth  and  shut  your  eyes  and  see  what  God' 
(the  employer)  'will  give  you.'  " 

George  L.  Berry,  President,  International  Printing 
Pressmen  and  Assistants  Union  of  North  America: 

"I  would  oppose  any  such  scheme  as  that,  even  if 
it  did  not  militate  against  the  trade  organization, 
unless  the  workers,  through  a  well-established  pro- 
prietary right,  were  placed  in  a  position  of  deter- 
mining the  matter  of  procedure,  policy,  etc." 

James  P.  Holland,  President,  New  York  State  Fed- 
eration of  Labor : 

"A  cash  distribution  makes  some  men  work  hard 
to  the  detriment  of  other  men.  The  bonus  system 
makes  men  dissatisfied,  and  they  are  unable  to  air 
their  grievances  for  the  reason  that  they  would  lose 
their  bonuses. 

"The  selling  of  stock  to  the  men  at  a  low  price  is 
the  means  of  stopping  them  from  organizing. ' ' 


239 

Paul  Scharrenberg,  Secretary-Treasurer,  California 
State  Federation  of  Labor : 

*'I  am  utterly  opposed  to  any  scheme  or  plan  of 
profit  sharing  of  the  variety  so  far  proposed  in  this 
country. ' ' 

B.  A.  Larger,  General    Secretary,    United    Garment 
Workers  of  America : 

**In  most  cases  where  the  cash  distribution  or 
bonus  is  given,  wages  are  low  and  hours  long." 

A.  P.  Sovey,  President,  International  Brotherhood  of 
Bookbinders : 

*'You  will  find  in  most  instances,  where  a  cash  dis- 
tribution is  made  annually  or  where  a  bonus  is  paid 
weekly  or  monthly,  that  the  recipients  are  usually 
paid  far  below  their  real  value  for  services  per- 
formed." 

William   Green,   Secretary-Treasurer,   United   Mine 
Workers  of  America : 

'  *  If  the  profits  of  a  concern  will  permit  of  distribu- 
tion among  the  men  employed,  instead  of  being  dis- 
tributed as  profits  of  the  concern,  the  money  should 
be  paid  to  them  in  wages  that  would  be  regarded  as 
just  and  fair.  This,  in  my  experience  in  dealing 
with  laboring  men,  gives  more  general  satisfaction 
than  any  profit-sharing  plan  of  which  I  have  ever 
heard." 

Frank  Butterworth,  President,  International  Brick, 
Tile  and  Terra  Cotta  Workers'  Alliance: 

**A11  the  cases  with  which  I  have  come  into  actual 
contact  were  either  subterfuges  to  secure  a  bigger 
output  or  were  used  as  an  instrument  to  stop  men 
from  organizing  by  substituting  a  fake  proposition 
for  a  raise  in  wages,  and  were  so  hedged  in  with  con- 
ditions that  few  men  received  anv  benefit  at  all." 


240 

Hugh   Feayne,   General   Organizer,   American   Fed- 
eration of  Labor: 

"There  are  many  schemes  and  methods  adopted  by 
employers,  especially  among  the  larger  corporations, 
to  prevent  their  employees  from  organizing  trade 
unions  and  in  order  to  overcome  any  signs  of  unrest 
among  them  they  generally  inaugurate  some  system 
of  bonus  paying  to  the  workers  which  is  nothing  more 
than  a  socialized  form  of  charity. 

"Some  employers  adopt  the  plan  of  giving  pres- 
ents to  their  employees  during  the  holiday  season 
and  make  a  great  deal  of  capital  out  of  same  even 
going  so  far  as  to  boast  of  how  kind  and  generous 
they  are  to  their  employees  which  they  want  it  un- 
derstood they  are  not  obliged  to  do,  only  through 
the  goodness  of  their  hearts,  but  invariably  you  will 
find  that  there  is  an  underlying  motive  in  this  com- 
mercialized philanthropy  and  we  find  that  those  who 
are  the  most  favored  by  the  employers  because  of 
their  willingness  to  take  the  initiative  in  all  schemes 
for  the  promotion  of  a  greater  production  bringing 
larger  profits  to  the  employers  without  any  extra 
compensation  to  the  workers,  are  the  ones  who  get  the 
most  expensive  presents  when  they  are  being  given 
out. 

"The  selling  of  stock  to  employees  is  another  plan 
used  by  employers  chiefly  for  the  purpose  of  weaning 
them  away  from  any  thought  of  becoming  members 
of  a  trade  union.  From  one  to  five  shares  of  stock 
in  the  concern  are  usually  sold  to  the  employee  at 
par,  sometimes  below  that  amount,  and  in  other 
cases  the  stock  is  given  free  of  charge  while  the 
rights  of  the  employee  holding  this  stock  are  never 
recognized  in  any  way  so  far  as  the  firm  or  its  affairs 
are  concerned.  The  worker  is  constantly  reminded, 
however,  that  to  join  a  union  or  to  go  on  strike  or  in 
any  way  antagonize  the  company  would  seriously 
jeopardize  his  own  interest  as  a  stockholder  of  the 


concern." 


The  brotherhoods  of  the  railway  engineers,  conduc- 
tors, trainmen,  and  firemen  and  enginemen,  not  affiliated 


241 

with  the  American  Federation  of  Labor,  represent  an- 
other large  class  of  organized  workmen. 

Warren  S.  Stone,  Grand  C'hief  International  Brother- 
hood of  Locomotive  Engineers,  says : 

"I  am  opposed  to  profit  sharing,  of  any  kind,  un- 
der any  name.  I  believe  in  paying  the  worker  fair 
wages  and  allowing  him  to  look  after  his  own  inter- 
ests. All  forms  of  profit  sharing,  be  they  a  cash  dis- 
tribution or  a  bonus,  or  the  selling  of  stock  at  low 
rates,  are  subject  to  the  same  abuses. 

"They  have  a  tendency  to  speed  up  the  worker, 
and,  in  addition  to  that,  they  make  him  resigned  to 
work  under  conditions  which  otherwise  he  would  not 
tolerate  for  a  single  day,  were  it  not  for  the  hope  of 
the  bonus  in  the  near  future  which  is  always  being 
kept  before  him. 

''The  various  stock  subscription  plans  are  in  na 
sense  profit  sharing.  A  moment's  examination  of 
the  subject  will  show  that  I  am  right.  If  an  em- 
ployee purchases  stock,  whatever  he  receives  by  way 
of  dividends  he  receives  in  his  capacity  as  stock- 
holder and  not  as  employee.  If  a  dividend  is  de- 
clared he  is  entitled  to  it  as  a  matter  of  absolute 
right — whether  he  continues  as  an  employee  or  not. 
Now  whatever  he  may  receive  by  way  of  bonus  on  his 
stock,  such  as  an  extra  five  dollars  per  share  per 
year  provided  he  has  been  a  certain  number  of  years 
in  the  employ  of  the  company,  is  paid  to  him  because 
he  has  given  the  company  something  in  addition  to 
his  labor  from  day  to  day,  namely,  a  continuity  of 
service,  the  value  of  which  to  the  company  far  ex- 
ceeds the  bonus  on  the  stock.  Moreover,  when  an 
employee  is  induced  to  invest  his  savings  in  stock  of 
the  company  for  which  he  works,  there  is  brought 
about  a  situation  the  practical  result  of  which  is  an 
insurance  against  strikes.  Therefore,  the  wage  ad- 
dition which  the  stockholding  employee  receives  is 
not  a  share  of  the  profits  but  a  payment  for  a  sub- 
stantial consideration  which  the  company  receives 
in  addition  to  the  employee's  labor. 

"So  much  for  the  theory  of  that  type  of  profit 
sharing.  Now  a  word  as  to  the  amount  of  the  em- 
ployee's share  of  the  so-called  profits.  Take  the 
United  States  Steel  Corporation  as  a  fair  example. 


242 

An  employee  earning  $900  per  year  subscribes  for 
one  share  of  Preferred  Stock  and  pays  for  it  in  in- 
stalments running  over  one  year.  If  he  holds  on  to 
both  his  job  and  his  stock  he  gets  an  annual  bonus 
of  five  dollars  a  year  for  not  exceeding  five  years. 
If  that  man  should  remain  with  the  company  for  ten 
years,  he  would  receive  as  a  payment  for  that  con- 
tinuous service  the  sum  of  $25  or  approximately 
only  one-quarter  of  one  per  cent  of  his  wages. 

''But  quite  apart  from  the  fact  that  stock  selling 
is  not  profit  sharing  either  in  principle  or  in  prac- 
tice, there  is  still  another  and  fundamental  objection 
to  it — one  that  goes  to  the  basis  of  corporate  man- 
agement in  the  country — and  that  is  that,  taken  as  a 
whole,  public  utility  and  industrial  stocks  are  not 
proper  investments  for  the  savings  of  the  ordinary 
employee.  Furthermore,  they  never  will  be  proper 
investments  for  him  until  he  can  ascertain  with  some 
degree  of  precision  and  from  some  authoritative 
source,  that  for  every  dollar  of  par  value  of  stock 
issued,  the  company  has  back  of  it  one  dollar  in  cash 
or  its  equivalent  in  actual  property.  That  situation 
will  never  exist  under  the  present  corporation  laws 
of  the  various  states  under  which  it  is  possible  to  is- 
sue reams  of  so-called  securities  against  goodwill — 
dubious  patent  rights  and  other  considerations,  the 
value  of  which  is  fixed  by  a  board  of  dummy  direc- 
tors, carrying  out  the  instructions  of  promoters  who 
will  in  turn  unload  the  stock  on  a  gullible  public  or 
unsuspecting  employees. 

"The  trouble  with  selling  stock  at  low  rates  is 
that  until  there  is  some  form  of  regulation  of  stock 
issuing,  it  does  not  mean  anything.  A  very  large 
percentage  of  the  stock  held  today,  and  that  in  the 
open  market,  represents  no  real  value,  but  is  simply 
an  added  drain  upon  the  productive  efficiency  of  the 
employees  and  is  issued  wholly  and  solely  to  take  up 
any  surplus  that  might  be  left  over  after  paying 
money  a  fair  dividend  on  the  real  value  of  the  in- 
vestment. Until  the  stock  can  be  guaranteed  at  its 
face  value,  it  does  not  mean  anything  to  the  worker; 
and,  again,  it  has  a  tendency  to  make  the  worker 
satisfied  with  the  company  or  corporation  and  work 
harder  than  ever  before,  perhaps  for  starvation 
wages,  in  the  hope  that  he  can  get  his  stock  finally 


243 

paid  for,  and  then,  too  often  he  learns,  to  his  bitter 
disappointment,  that  it  represents  no  real  value 
after  all. 

*'The  savings  of  the  workingman  are,  morally  at 
least,  the  property  of  his  wife  and  children;  they 
should  be  invested  with  the  same  care  and  prudence 
which  the  law  requires  for  the  investment  of  the 
funds  of  widows  and  orphans,  and  any  scheme  which 
seeks  to  divert  them  into  speculative  channels  and 
tie  them  up  to  a  particular  job  is  vicious  in  prin- 
ciple and  cannot  be  too  emphatically  condemned. 

'*So  far  as  giving  the  employees  a  compelling 
voice  in  the  management  of  a  company  through  their 
stockholding  acquired  under  the  subscription  plan 
is  concerned,  the  mere  suggestion  of  such  a  thing  is 
nothing  more  nor  less  than  a  grim  joke.  While  it  is 
theoretically  possible  for  the  employees  to  gain  the 
stock  control  of  a  corporation,  we  know,  as  a  matter 
of  every-day  observation,  that  such  a  thing  is  in  prac- 
tice utterly  impossible.  Even  if  it  were  possible  for 
the  employees  to  acquire  51  per  cent  of  the  stock 
of  a  solvent  corporation,  they  would  be  unable  to  dis- 
lodge the  management,  as  experience  has  frequently 
shown  how  easy  it  is  for  insiders  to  water  the  capi- 
tal stock  and  issue  indirectly  to  themselves  a  vast 
amount  of  additional  securities,  by  which  control  is 
not  only  retained  but  future  earnings  of  the  corpora- 
tion are  capitalized." 


244 


DIFFICULTIES  OF  PROFIT  SHARING 

PROFIT  SHARING;  TRADE  UNIONISM;  LABOR 
CO-PARTNERSHIP. 

J.    W.    SULLIVAN.* 

Profit  sharing  is  a  meaningless  term.  It  conveys  no 
settled  signification.  It  refers  to  no  fixed  and  definite 
economic  principle. 

As  carried  on,  especially  in  America,  so-called  profit 
sharing  methods  have  ranged  from  plans  established 
by  self-denying  philanthropists  to  plans  put  in  force  by 
selfish  men  actuated  solely  by  avarice.  Hence,  in  gen- 
eral, the  methods  have  been  irreconcilable  with  any  uni- 
form system;  they  have  not  been  reducible  to  a  con- 
sistent classification. 

The  various  notions  which  pass  under  the  term  profit 
sharing  have  been  put  before  the  public  by  employers  j 
they  have  rarely  been  the  results  of  desires  expressed 
by  employees. 

The  social  design  represented  in  profit  sharing  may 
be  as  far  apart  as  autocracy  and  democracy;  in  practice 
it  is  generally  autocracy.  The  employer  takes  upon  him- 
self certain  rights,  duties  and  responsibilities  that  per- 
tained to  the  feudal  lord. 

(*Mr.  Sullivan  Is  a  member  of  the  International  Typographical 
Union;  general  lecturer  for  the  American  Federation  of  Labor;  has 
followed  closely  the  progress  of  cooperation  for  more  than  thirty  years; 
was  the  only  delegate  from  America  at  the  second  International 
Cooperative  Congress  in  Paris  in  1896;  has  a  large  collection  of  reports 
and  other  works  relating  to  cooperation,  profit  sharing,  and  co-part- 
nership; for  many  years,  as  an  exchange  editor,  has  kept  abreast  of 
the  movement  through  reading  the  cooperative  periodical  publications; 
in  the  course  of  more  than  five  years'  residence  in  Europe  has  met  the 
leaders  in  the  cooperative  and  co-partnership  movements  of  various 
countries;  and  in  America  has  from  time  to  time  investigated  numer- 
ous attempts  at  cooperation.) 


245 

The  motive  varies.  It  has  been  simply  the  promotion 
of  workshop  efficiency;  it  has  been  advertising;  it  has 
been  war  on  trade  unionism;  it  has  been  good  fellowship, 
personal  and  direct;  it  has  been  uplift  for  the  working 
classes,  impersonal  and  remote. 

As  the  systems  have  varied  in  intention,  so  they  are 
carried  out  in  practice  only  to  the  point  decided  upon 
by  the  employer.  In  one  case  the  employer  pays  from 
year  to  year  to  each  of  the  various  grades  of  his 
employees  a  predetermined  share  of  the  profits.  In 
another  case,  the  division  is  made  among  selected  indi- 
viduals, the  amount  changeable  at  the  employer's  will. 
Whatever  the  percentage,  the  inclusion  or  exclusion  of 
variable  items  among  the  fixed  charges  affects  the  state- 
ment of  profits.  Difficulties  in  this  respect  are  the 
amounts  to  be  allotted  to  depreciation  of  plant,  to  the 
losses  of  unprofitable  years,  and  to  the  expected  regular 
return  on  the  capital  invested,  usually  a  percentage  much 
above  current  interest. 

When  the  aim  is  merely  higher  efficiency,  profit  shar- 
ing is  but  a  distribution  of  gains  accomplished  through 
a  more  compact  and  better  greased  mechanism.  It  is 
but  a  bonus,  based  on  the  sum  of  the  wages  drawn.  It 
may  be  only  an  annual  make-up  of  withheld  wages.  When 
the  aim  is  not  simply  efficiency,  the  profits  to  be  shared 
may  possibly  be  a  benevolent  addition  to  wages.  The 
test  of  value  to  the  workman  in  either  case  is  whether 
the  advances  equal  those  ordinarily  obtained  through 
trade  unionism. 

In  America  a  noteworthy  fact  has  been  the  large 
number  of  experiments  reported  as  profit  sharing  which 
have  passed  out  of  existence.  Many  of  these  ventures, 
viewed  from  subsequent  developments,  are  to  be  seen  as 
sordid  publicity  schemes.  Twenty  years  ago — and  before 
that,  thirty  to  forty  years  ago — profit  sharing  as  an 
economic  betterment  was  the  subject  of  much  newspaper 
coddling,  some  houses  in  New  York  with  buncombe  profit 
sharing  features   courting   extensive   Sunday  magazine 


246 

fame.  More  than  one  champion  in  that  frothy  movement 
perished  of  impudent  dishonesty.  In  some  cases,  it  is 
true,  the  originators  died,  in  others  they  ceased  their  con- 
nection with  the  concerns  interested,  and  in  others  again 
new  managers  brought  a  reversion  to  the  straight  wages 
practice.  Instability  in  the  personal  composition  of 
management  has  militated  against  profit  sharing  taking 
a  recognized  place  on  a  large  scale  as  a  permanent 
economic  institution  of  social  value. 

Uncertainty  is  a  disturbing  factor  in  profit  sharing — 
uncertainty  as  to  whether  there  are  to  be  profits  from 
year  to  year,  uncertainty  as  to  what  the  profits  actually 
may  be  in  any  one  year,  uncertainty  on  the  part  of  the 
employees  as  to  the  employer  revealing  his  true  profits, 
uncertainty  as  to  the  settled  proprietorship  of  the  estab- 
lishment, pi  these  uncertainties,  it  is  seen  that  the 
interests  and  expectations  of  a  force  of  laborers  are  con- 
stant— the  highest  obtainable  level  in  wages,  hours  and 
working  conditions, — while  the  purposes  of  coming  and 
going  employers  are  variable,  including  selling  out  either 
at  a  sacrifice  or  a  boom  profit. 

In  this  unsettled  profit  sharing  there  usually  can  be 
no  definite  hand-in-hand  partnership  of  labor  and  capital. 
The  two  interests  work  strictly  apart,  each  in  its  accus- 
tomed sphere.  Capital  sees  an  opportunity,  undertakes 
an  enterprise,  buys  site  and  plant,  decides  upon  the  scale 
of  production,  manages  the  workshops,  watches  the  mar- 
kets, pushes  sales,  enlarges  or  diminishes  the  works,  runs 
the  risks — in  all  respects  making  the  mistakes  or  supply- 
ing the  strokes  of  talent  that  count  in  management.  The 
industrial  wage-working  employee,  while  supplying  the 
essential  factor  of  more  or  less  skilled  manipulation  of 
matter  resulting  in  concrete  production,  projects  no 
effort  into  the  field  of  plan,  production,  purchase  and 
distribution. 

A  manifest  weakness  in  profit  sharing  is  the  legiti- 
mate disinclination  of  employers,  especially  small 
employers,  to  reveal  the  scale  of  their  profits,  probably 


247 

to  be  made  use  of  by  competitors,  money  lenders  and 
taxers  of  every  description.  Low  profits  may  at  times 
show  up  an  employer  as  a  blunderer;  high  profits  may 
induce  the  advent  of  unwelcome  rivals.  A  showing  of 
scant  profits  may  affect  him  detrimentally  with  his 
bankers  or  injure  the  advantageous  sale  of  his  business. 

From  the  point  of  view  of  the  wage  worker,  the 
dubious  points  of  paternal  profit  sharing  are  numerous. 
Of  course,  if  the  annual  dividend  comes  simply  in  the 
form  of  cash  with  no  string  to  it,  the  windfall  may  be 
unobjectionable.  The  two  sides  are  quits.  But  the 
increase  in  pay  to  the  fortunate  ones — fortunate  in  case 
they  already  enjoy  prevailing  wages — is  generally  accom- 
panied with  intensified  supervision,  irritating  interfer- 
ence and  a  humiliating  patriarchal  domination.  Added 
thereto  may  be  a  discipline  extending  beyond  the  legiti- 
mate jurisdiction  of  the  factory  and  the  purely  commer- 
cial relations  usually  existing  between  two  sides  of  bar- 
gain makers.  The  first  query  on  behalf  of  the  wage 
worker  is  the  level  of  pay  from  which  the  profit  sharing 
begins.  All  told,  what  is  paid  may  be  only  a  miserable 
substitute  for  standard  wages.  A  scheme  taking  in  only 
foremen  and  superintendents,  each  expected  to  make  a 
record,  results  in  sweatshop  slave  driving.  Taking  in 
an  entire  force,  the  purpose  may  be  a  general  bribery  to 
keep  out  of  labor  organizations.  The  avowed  co-opera- 
tion in  profit  sharing  must  be  subject  to  proof  in  every 
case,  but  the  straight  wages  system  brings  a  sufficiently 
definite  and  satisfactory  cohesion  of  capital  and  labor, 
with  every  man  on  each  side  knowing  at  all  times  just 
where  he  is.  A  mutual  forced  dependence  may  prove 
more  irksome  and  less  human  than  a  mutual  inde- 
pendence. 

As  one  effect  of  professed  profit  sharing,  the  wage 
worker  sees  ramifications  of  pace  making.  Within  the 
workshop  the  best  awards  go  to  the  foreman  most  exact- 
ing and  the  workman  most  selfishly  active.  Piece  work, 
overtime,  unfair  allotment  of  tasks  here  become  features 


248 

of  administration.  Various  occupations  have  their  pe- 
culiar forms  of  pace  making.  A  worlvman  may  be  a  pace 
maker  as  to  speed  and  as  to  ingratiating  subserviencies. 
The  toadies  and  time-servers  lead  to  degeneracy  of  man- 
hood. Their  reward  is  a  preferment — the  easy  situation 
and  the  steady  work.  Straining  for  efficiency  in  a  x)rofit 
sharing  establishment  may  become  a  species  of  pace  mak- 
ing of  the  entire  force,  as  against  the  organized  men  of 
a  straight  wages  establishment.  Scabbing  may  be  prac- 
tised by  institutions  as  well  as  by  individuals. 

An  unfulfilled  promise  of  profit  sharing  is  the  benefit 
to  employers  from  ''loyalty."  It  is  assumed  that  the 
steadiest  and  most  tractable  mechanics  are  the  best  pay- 
ing hands.  Wage  workers  know  that  in  numerous  cases 
this  is  not  the  fact.  Physical  endowment,  nervous  force, 
an  active  intelligence,  mechanical  aptitude,  excellence  in 
expert  work,  a  general  know^ledge  of  the  trade — these 
qualities  frequently  characterize  the  workman  who  occa- 
sionally takes  time  for  himself  or  goes  off  to  fields  afar. 
His  nature  is  adventurous,  unrestful,  explosive.  He  is 
the  first  to  go  to  war  or  to  try  out  schemes  of  his  own. 
He  is  a  self-speeder,  a  live  wire  in  a  gang,  a  disseminator 
of  ideas  helpful  to  an  industry.  He  is  the  knowing  com- 
mercial traveler  in  his  occupation.  On  the  other  hand, 
the  model  * '  faithful  old  employee ' '  not  infrequently  is  but 
a  plausible  ''old  soldier."  The  rule  of  not  admitting  an 
employee  to  the  profit  sharing  under  several  years  of 
service  is  a  discouragement  to  a  considerable  mass  of 
valuable  workmen.  These  will  naturally  earn  their 
weekly  pay  and  when  inclined  move  on.  About  one-third 
of  our  manufacturing  wage  workers  are  not  regular 
hands,  a  proportion  established  as  much  by  the  restless- 
ness of  the  workers  as  by  fluctuations  in  the  amount  of 
work.  Profit  sharing  takes  little  account  of  this  impor- 
tant third.  A  statistical  disclosure  of  the  number  of  men 
quitting  profit  sharing  establishments  directly  after 
annual  dividend  payday  would  tell  enlightening  tales 
regarding  contentedness,  the  general  level  of  wages,  and 


249 

the  validity  of  loyalty  when  the  wage  worker  has  at  length 
the  withheld  wages  of  the  year  in  his  pocket.  A  statis- 
tical statement  of  the  number  of  strikes  against  profit 
sharing  employers  might  reveal  truths  both  as  to  wages 
and  ''loyalty." 

Is  the  relationship  between  employer  and  employee 
under  profit  sharing  so  sweetly  and  pleasantly  ethical? 
Of  a  certainty,  reputed  profit  sharing  employers  have 
been  open  to  the  charges  of  pretense,  hypocrisy  and  per- 
version of  principle.  The  employer  assuming  to  share 
dividends  may,  through  the  laborer's  increased  effort, 
actually  advance  a  step  in  skinning;  the  straining  and 
anxiety  of  the  laborer  reaching  for  the  prize  dangling 
before  his  eyes  may  result  in  a  greater  prize  going  to  his 
employer.  Plainly,  a  hypocritical  employer,  posing  as 
a  model  profit  sharer,  may  be  actuated  by  a  thinly  veiled 
avarice. 

The  inside  facts  must  necessarily  be  a  matter  of  study 
with  the  employees  of  each  profit  sharing  establishment. 
They  know,  when  the  motive  of  the  employer  is  "effi- 
ciency," that  time  will  disclose  persistent  greed  or  per- 
haps a  strenuous  effort  to  make  a  precarious  or  parasit- 
ical venture  pay ;  they  know,  when  it  is  anti-trade  union- 
ism, that  they  themselves  are  awaiting  a  possible  day  of 
reckoning;  they  know,  when  it  is  vanity,  how  heartless 
and  ridiculous  is  the  employer. 

Trade  unions,  for  good  reasons  founded  on  knocks, 
do  not  advocate  profit  sharing.  They  place  the  system 
under  no  total  indiscriminate  condemnation.  They  do 
know  that  the  idea  is  distinct  from  the  union  principle; 
their  criticism  may  be  disarmed  if  the  profits  paid  are 
through  decades  supplementary  to  unionism.  A  major 
point  with  unionists  is  that  profit  sharing,  as  developed 
in  sporadic  examples,  has  had  no  effect  in  the  elevation 
of  the  whole  mass  of  the  wage  workers.  It  has  not  been 
a  part  of  the  world-wide  labor  movement.  Where  prac- 
tised, it  has  in  many  ways  narrowed  the  workman's 
social  vision.    He  has  seen  no  further  than  his  own  work- 


250 

shop ;  he  has  concentrated  his  mind  on  his  own  immediate 
well-being;  he  has  not  been  encouraged  to  attend  the 
assemblies,  to  take  part  in  the  discussions,  to  subscribe 
to  the  literature,  to  imbibe  the  spirit  of  labor  organiza- 
tions, all  of  which  have  led  to  independent  working-class 
social  and  economic  activities.  The  effects  of  the  volun- 
tary inclusive  association  of  all  the  workers  of  his  occu- 
pation have  been  beyond  his  mental  horizon. 

The  advances  in  welfare  of  the  great  body  of  our 
nation's  industrial  workers  have  come  in  the  form  of  the 
shorter  workday  and  the  higher  wage.  Not  until  long 
after  union  achievement  in  this  field  have  profit  sharing 
employers  had  any  noticeable  part  in  preaching  the  eight- 
hour  day,  while  the  rates  they  have  paid,  plus  the  profits 
they  have  shared,  have  usually  been  surpassed  by  the 
advancing  union  scale.  The  propaganda  by  profit  shar- 
ing employers  of  their  principle  in  the  various  industrial 
nations  during  the  last  half  century  has  not  brought 
under  its  influence  five  per  cent  of  the  wage  workers 
in  any  country;  the  propaganda  by  the  trade  unions  of 
their  principle  has  brought  to  them  in  the  same  period 
the  mastery  of  the  labor  market  in  many  industries  in 
every  country. 

Trade  unionism  aims  to  claim,  as  a  right,  from  the 
nation's  annual  production  what  it  believes  to  be  labor's 
share.  Profit  sharing  sees  the  master  giving  an  award 
to  his  servant.  Even  if  it  be  conceded  that  the  employer 
acts  from  the  praiseworthy  motive  of  generosity,  or  of 
fellowship,  or  of  transforming  an  unjust  to  a  just  society, 
the  case  remains  that  of  the  strong  condescending  to  aid 
the  weak. 

The  union  spirit  appeals  to  the  vast  majority  of  the 
wage  working  classes  for  the  reason  that  a  labor  organi- 
zation initiates  and  backs  up,  both  to  employers  and  to 
society  in  general,  proposals  which  embody  the  workers' 
aspirations.  These  contemplate  economic  conditions  in 
the  large,  aim  at  the  control  of  labor's  side  in  the  sale  of 
labor's  power  and  seek  social  benefits  beyond  the  bounds 


251 

of  any  single  industiy.  The  union  has  an  influence  on 
general  conditions,  through  education,  agitation,  legisla- 
tion. It  reaches  out  to  protect  the  weak — the  women  and 
children — everywhere.  No  social  reform  is  beyond  its 
purview.  Compared  with  a  broad  survey  of  the  functions 
and  purposes  and  achievements  of  trade  unionism,  what 
profit  sharing  has  actually  done  shrinks  to  pitifully  petty 
dimensions.  Granted  its  every  claim,  it  has  been  an 
inconsiderable  branch  of  assisted  thrift,  usually  con- 
tingent in  practice  on  the  changeable  will  of  a  mutable 
power. 

To  the  sincere  employer,  desirous  of  improving  the 
welfare  of  his  employees,  any  project  for  profit  sharing 
presents  a  difficult  problem.  In  some  exceptional  estab- 
lishments, such  as  gas  works,  turning  out  regularly  a 
single  product  with  a  certainty  of  its  entire  sale  at  a 
fixed  price,  profit  sharing  has  now  passed  well  into  a 
satisfactory  experimental  stage,  but  the  obstacles  to  bene- 
fitting the  employees  of  all  grades  in  occupations  gen- 
erally are  obviously  so  numerous  as  to  shut  out  an  occa- 
sional successful  method,  evolved  in  unusual  circum- 
stances, as  a  model  for  a  system  or  as  the  triumph  of 
a  principle. 

On  the  whole,  the  outcome  in  the  countries  of  our 
civilization  in  which  profit  sharing  has  been  preached 
for  seventy  years,  and  been  the  subject  of  an  amount 
of  favorable  comment  enormously  disproportionate  to 
its  results,  employers  may  be  well  advised  before  taking 
up  with  it  to  study  in  fairness  the  aims  and  efforts  of 
trade  unionism  as  a  world-wide  movement.  The  moral 
and  commercial  atmosphere  is  cleared  when  the  employer 
pays  prevailing  wages  for  trade  union  hours,  maintains 
good  working  conditions  in  his  establishment,  and  recog- 
nizes that  in  the  labor  market  he  is  inevitably  on  one 
side,  that  of  the  buyers,  while  the  employees  are  just  as 
surely  on  the  other,  that  of  the  sellers.  The  correct  rela- 
tions of  employer  and  employee  may  in  these  circum- 
stances become  fair  play,  mutual  respect,  recognition  of 


252 

reciprocal  rights  and  duties,  the  whole  leavened  with 
average  honesty,  good  nature,  and  kindred  sentiments  of 
humanity.  Acting  with  a  wisdom  founded  on  experience, 
the  two  sides  thus  set  up  what  is  tantamount  to  a  prac- 
tical and  paying  co-operation.  In  the  standard  literature 
relating  to  profit  sharing  in  leading  countries,  the  well 
defined  and  unmistakably  just  point  of  departure  toward 
idealistic  aims  is  recognized  as  being  from  conditions 
established  by  the  trade  union. 

Labor  co-partnership  begins  at  this  stage.  In  theory 
a  transformation  from  capitalistic  enterprise  to  the  asso- 
ciation of  capital  and  labor  in  mutual  effort,  it  usually 
begins  in  practice  as  an  extension  from  genuine  profit 
sharing,  "enabling  the  worker  to  accumulate  his  share 
of  profit  in  the  capital  of  the  business  employing  him, 
thus  gaining  the  riglits  and  responsibilities  of  a  share- 
holder." A  further  step  is  provision  "for  a  direct  share 
in  the  management  as  well  as  in  the  profits. ' '  A  leading 
British  writer  on  labor  co-partnership  says  that  the 
best  safeguard  of  wages  "is  the  free  play  of  trade  union 
principles,  and  any  firm  which  refuses  to  recognize  the 
conditions  generally  observed  in  the  trade  puts  itself 
out  of  court  as  a  profit  sharer."  Another  writes,  "I 
am  going  to  repudiate  the  idea  that  co-partnership  is  a 
substitute  for,  or  in  any  way  is  antagonistic  to,  trade 
unionism. "  "  You  cannot  say  you  have  given  the  worker 
a  profit  unless  he  has  first  had  the  standard  wages  for 
his  service.  Co-partnership,  therefore,  assumes  a  stand- 
ard wage.  The  standard  wage  again  assumes  organiza- 
tion to  maintain  it  and  to  raise  it.  It  assumes  the  exist- 
ence of  trade  unions,  collective  bargaining,  and  the  meet- 
ing of  capital  and  labor  upon  equal  terms, ' ' 

In  Great  Britain,  the  labor  co-partnership  movement 
stands  entirely  apart  from  the  establishments  that  pro- 
fess only  profit  sharing.  Its  principles  are  promoted  by 
an  educational,  advisory  and  propagandist  organization. 
This  body  works  by  means  of  lectures,  conferences,  litera- 


253 

ture  and  correspondence.  It  has  a  monthly  organ.  It 
drafts  plans  to  meet  the  special  Cvonditions  of  each  busi- 
ness, gives  legal  advice  bearing  on  co-partnership  and 
cognate  subjects,  drafts  rules  to  meet  the  special  condi- 
tions of  each  experiment,  and  has  representatives  to  ex- 
plain the  principles  to  groups  of  employers  and  em- 
ployees. 

Excepting  thirty-six  gas  companies,  the  British  Labor 
Co-Partnership  Association  is  made  up  of  businesses 
established  (with  two  or  three  exceptions)  by  working 
men.  Of  these,  there  are  one  hundred  and  ten,  with  a 
capital  of  nearly  ten  million  dollars,  having  an  annual 
trade  of  more  than  twenty  millions  and  a  dividend  on 
wages  of  $150,000.  In  the  gas  works  more  than  22,000 
employees  are  under  agreement  for  profit  sharing  or  co- 
partnership and  the  market  value  of  their  shares  and 
deposits  is  $3,350,000. 

In  commenting  on  these  facts,  a  vice  president  of  the 
association  says :  "I  ought  perhaps  to  emphasize  the 
distinction  between  co-partnership  and  profit  sharing. 
The  latter  is  a  necessary  element  in  the  former,  but  only 
one  of  two,  the  other  being  capital-owning.  Where  a 
capitalist  pays  his  workers  a  share  of  the  profit  thej^  help 
to  produce,  that  may  be  an  excellent  thing,  according  to 
the  object  sought  by  it  and  the  system  on  which  it  is 
done;  but  many  regard  facilities  for  capital-owning  by 
the  employee  in  addition  to  participation  in  profits  as 
being  essential  to  co-partnership." 

"Owning  collectively  the  tools  they  use,"  says  a 
writer  on  co-partnership,  "the  workers  gain  the  sense 
and  dignity  of  possession."  "Possession  has  a  strong 
educative  influence;  it  lifts  and  elevates  the  mind  of  the 
employee,  gives  him  a  new  interest  in  life  and  broadens 
his  outlook  on  public  affairs,  strengthens  his  grit  and 
character,  and  makes  him  a  better  citizen."  The  same 
writer  says  that  the  establishment  of  co-partnership 
societies  has  been  followed  in  a  short  time  by  a  rise  of 
wages  in  the  particular  trade  involved,  by  the  employees 


254 

taking  prominent  positions  among  trade  unionists,  and 
by  conditions  generally  in  the  trade  being  improved. 

Some  observers  have  seen  something  of  a  parallel  in 
co-partnership  and  syndicalism.  But  the  movements  are 
distinct,  both  in  means  and  finalities.  Co-partnership 
aims  to  absorb  what  share  of  industry  it  can  through 
peaceful  and  legal  measures — contract,  compensation, 
step-by-step  education  of  labor  in  business  and  co-opera- 
tive methods.  It  but  seizes  legitimate  opportunity  to 
place  laborers  with  their  own  capital  in  the  position  now 
occupied  by  capitalists  and  laborers.  The  mere  state- 
ment of  the  facts  in  this  form  separates  the  movement 
from  syndicalism,  which  forbids  contracts  with  employ- 
ers, plans  to  master  industries  through  the  general  strike, 
and  then  establish  independent  communist  systems  within 
an  anarchistic  society. 

To  the  query  why  co-partnership,  with  its  manifest 
social  advantages,  has  not  already  become  a  great  world- 
wide movement,  the  answer  must  lie  in  the  shortcomings 
of  human  nature  as  at  present  developed.  They  form  an 
almost  insuperable  obstacle  to  all  transforming  social 
movements.  Taken  as  a  whole,  the  employing  class  is 
selfish ;  taken  as  a  whole,  the  employed  class  is  incapable 
— financially,  technically,  co-operatively. 

The  reader  now  has  a  sketch  of  the  case  for  profit 
sharing  and  of  that  for  co-partnership,  regard  for  the 
interests  of  trade  unionism  being  interwoven  with  each. 
Attempt  has  been  made  in  this  brief  statement  to  outline 
the  general  movement  toward  voluntary  participation, 
not  only  of  profits  but  in  business  enterprise  itself,  to 
indicate  the  outcome  of  experiments  sincere  or  otherwise, 
to  tell  the  employer  his  most  direct  way  toward  making 
the  employee  really  his  partner,  and  to  give  the  employee 
the  information  he  needs  in  a  study  of  a  transformation 
of  capital  vs.  labor  into  capital  owned  by  labor,  a  change 
in  which  all  his  rights  as  man  and  unionist  can  be  fully 
protected. 


255 

SHOULD  WAGE  EARNERS  INVEST  IN 
CORPORATION  STOCK? 

(From  an  article  on  the  Democratization  of  Industry). 

B..   M.   EASLEY. 

*' There  are  too  few  enterprises  where  stock  in  a  cor- 
poration is  continually  a  safe  investment  of  the  savings 
of  wage  earners.  How  many  of  the  million  employees  on 
the  railroads,  for  instance,  would  have  been  safe  during 
the  last  few  years  in  putting  their  savings  into  the  stock 
of  the  roads  upon  which  they  were  working?  We  in- 
stantly think  of  the  New  York,  New  Haven  and  Hartford, 
the  Rock  Island  and  the  'Frisco,  as  conspicuous  ex- 
amples, but  there  is  a  long  list  of  other  railroads  which 
have  not  been  charged  with  corruption  or  mismanagement 
whose  stocks  nevertheless  have  gone  down.  Stock  partici- 
pation would  not  be  practicable  at  all  in  the  building 
trades,  and  great  construction  works,  public  and  private, 
where  hundreds  of  thousands  of  employees  are  engaged, 
because  contractors  do  not  necessarily  employ  the  same 
men  on  two  consecutive  jobs.  In  the  printing  trades, 
how  many  members  of  the  Typographical  Union  would 
feel  safe  in  investing  in  the  stocks  of  the  newspapers  or 
job  printing  offices  where  they  work?  On  certain  public 
utilities,  what  seem  to  be  fairly  successful  plans  have 
been  inaugurated,  but  they  are  generally  those  which  the 
Public  Service  Commissions  have  been  able  to  regulate 
and  hold  down  to  legitimate  financing. 

"There  are  here  and  there  comparatively  small  cor- 
porations which  have  been  measurably  successful  finan- 
cially for  a  series  of  years,  and  there  are  a  few  very  large 
corporations  like  the  United  States  Steel  Corporation, 
the  International  Harvester  Company,  the  American 
Sugar  Refining  Company,  the  Standard  Oil  Company  and 
the  American  Tobacco  Company,  whose  preferred  stock 
has  been  a  safe  investment. 

"Another  very  serious  objection  which  is  made  to 
stock  participation  is  that  the  men,  for  the  first  time  in 


256 

their  lives,  begin  to  watch  the  stock  market,  and  this  is 
regarded  by  many  as  not  a  very  wholesome  habit.  Fol- 
lowing the  stock  market  leads  to  'taking  a  flyer'  and  that 
generally  leads  to  taking  a  loss.  A  workingman  whom  I 
know  put  a  little  money  which  he  had  saved  into  railroad 
stock  that  is  regarded  as  the  best  in  this  country  and  he 
has  held  on  to  it  and  received  his  dividends  regularly. 
In  keeping  himself  posted  on  stock  market  matters,  how- 
ever, the  gambling  spirit  got  hold  of  him  and  he  thought 
he  ought  to  do  something  better  than  get  his  regular 
six  per  cent  dividend,  so  he  persuaded  his  wife  to  put  the 
six  hundred  dollars  she  had  saved  into  another  stock  on 
margin  and  it  was  soon  wiped  out. ' ' 

LEGAL  STATUS  OF   EMPLOYER  AND  EMPLOYEE. 

FRANCIS  X.  BUTLER.* 

"In  considering  whether  profit  sharing  is  feasible  or 
practicable,  the  status  of  the  parties  between  whom  the 
profits  are  to  be  shared  must  first  be  determined. 

"The  legal  relation  of  employer  and  employee  is  that 
of  master  and  servant.  In  speaking  of  the  employee  as 
a  servant,  therefore,  the  term  is  used  in  its  legal  sense 
only.  Their  status  in  law  is  well  defined,  and  is  as  dis- 
tinct and  separate  as  that  of  debtor  and  creditor,  land- 
lord and  tenant,  vendor  and  vendee,  bailor  and  bailee, 
common  carrier  and  passenger  or  corporation  and  stocK 
holder. 

"The  special  laws  affecting  workingmen,  protecting 
wage  claims,  regulating  hours  of  labor,  defining  employ- 
ers' liability,  and  establishing  workmen's  compensation 
— all  emphasize  in  their  very  essence  the  distinction  be- 
tween the  wage  earners  and  the  profit  sharers  in  indus- 
try. 

The  Relative  Rights  of  Each. 

"The  employee  tenders  his  services  and  performs  his 

*Mr.  Butler  has  devoted  much  special  study  to  the  subject  of  profit 
sharing  and  his  views  were  reached  partly  as  the  result  of  his  con- 
sideration of  many  of  the  plans  described  in  this  report. 


257 

labor,  for  which  he  is  entitled  to  receive  a  just  wage 
agreed  upon  in  advance.  To  this  much  he  is  entitled 
whether  the  work  in  which  he  is  engaged  is  a  profitable 
or  a  losing  venture  for  his  employer.  If  there  is  a  loss 
the  employee  is  not  obliged  to  bear  any  portion  of  it. 
The  hazard  of  loss  or  gain  is  solely  that  of  the  employer 
and  if  there  is  a  profit  it  is  the  reward  of  the  employer 
for  his  industry  and  venture. 

Wages  Protected  By  Law. 
"So  zealously  has  the  law  guarded  the  wages  of  the 
employee  that  in  cases  of  insolvency  wage  claims  are 
granted  a  preference  over  those  of  ordinary  creditors. 

The  Employee  Under  the  Common  Law. 
"But  in  another  respect  the  law  has  been  correspond- 
ingly severe  in  its  treatment  of  the  employee  so  far  as 
the  right  of  the  servant  was  concerned  to  compensation 
for  injuries  received  in  the  scope  of  his  employment. 
This  severity  was  exemplified  in  the  harsh  rules  of  the 
common  law,  the  effect  of  which  was  to  grant  complete 
immunity  to  the  employer  from  any  liability  for  injuries 
sustained  by  the  employee  unless  due  solely  to  the  negli- 
gence of  the  employer.  Losses  arising  from  in- 
juries due  to  the  inevitable  hazard  of  the  indus- 
try were  borne  by  the  servant  and  those  dependent  upon 
him.  Even  in  such  cases  as  that,  the  line  of  demarcation 
between  the  status  of  employer  and  the  status  of  em- 
ployee was  clearly  defined,  and  the  law  permitted  no  en- 
croachment on  the  profits  of  the  employer.  In  other 
words,  there  was  no  division  of  losses,  which  is  the  corol- 
lary of  division  of  profits. 

The  Employee  Under  the  Statutes. 
"With  the  lapse  of  time  and  through  the  continued 
and  concerted  efforts  of  labor,  and,  generally  speaking, 
against  the  concerted  efforts  of  tlie  employer,  came  the 
various  employers'  liability  acts. 


258 

**  While  the  result  of  the  acts  was  to  benefit  the  em- 
ployee, they  necessarily  placed  corresponding  burdens 
on  the  employer,  and  in  so  doing  they  emphasized  more 
clearly  the  distinction  between  the  master  Who  is  entitled 
to  the  profits  of  his  venture  and  the  employee  who  is  en- 
titled to  wages  for  his  labor. 

"And  later  came  the  various  workmen's  compensa- 
tion acts,  which  in  effect  place  upon  industry,  ahead  of 
any  profits,  a  fixed  charge  by  way  of  contribution  to  a 
fund  to  compensate  the  wage  earner  for  losses  sustained 
through  injuries  notwithstanding  the  fact  that  they  may 
be  due  solely  to  the  hazard  of  the  industry  or  the  negli- 
gence of  a  fellow  workman. 

Profit  Sharing — a  Eight  or  a  Favor? 

''When  we  consider  the  legal  relation  of  employer 
and  employee ;  that  the  status  of  each  is  separate  and  dis- 
tinct, with  correlative  rights  and  obligations ;  that  among 
these  rights  is  that  of  the  employee  to  a  fixed  wage,  and 
that  of  the  employer  to  the  profits  of  the  industry;  that 
in  the  event  of  loss  the  employer  alone  must  bear  it  and 
that  he  cannot  look  to  the  employee  for  any  contribu- 
tion thereto — it  is  pertinent  to  ask  the  advocate  of  profit 
sharing  whether  the  employee  is  to  share  in  the  profits 
as  a  matter  of  right  or  as  a  matter  of  favor. 

' '  One  of  the  greatest  advocates  of  profit  sharing  says, 
'  There  should  be  no  philanthropy  about  this  great  ques- 
tion. It  is  purely  a  business  question.  .  .  No 
American,  worthy  of  being  called  a  man,  wants  something 
for  nothing. ' 

"It  is  obvious  that  if  profit  sharing  is  based  on  favor, 
the  so-called  divisions  of  profits  are  nothing  more  nor 
less  than  Christmas  presents  or  other  periodical  gifts, 
and  therefore  cannot  be  considered  as  a  serious  economic 
factor. 

"If  profit  sharing  is  predicated  upon  the  mutual 
rights  and  obligations  arising  out  of  the  relation  of  em- 
ployer and  employee,  or  if  it  is  based  upon  some  equita- 


259 

ble  right  or  obligation  flowing  out  of  that  relation,  it  is 
then  pertinent  to  ask  at  what  point  in  that  relation,  or 
under  what  circumstances,  does  the  right  to  demand  an 
increased  wage  cease  and  the  right  (which  labor  itself 
does  not  claim)  to  demand  a  share  of  the  profits  begin? 

''Unless  there  is  some  method  of  general  application 
by  which  that  point  may  be  established,  it  comes  down 
to  this,  that  the  employer — and  he  alone — can  say  when, 
to  what  extent  and  under  what  circumstances  the  em- 
ployee shall  be  permitted  to  exercise  his  supposed  right 
— an  arrangement  which  not  only  makes  the  employer 
the  umpire  but  permits  him  to  change  the  rules  in  the 
middle  of  the  game. 

"As  a  matter  of  abstract  justice,  if  the  employee  re- 
ceives a  just  wage,  he  receives  all  that  he  is  entitled  to 
in  the  way  of  compensation.  If  he  gets  less  than  a  just 
wage,  sharing  the  profits  with  him  may  tend  to  diminish 
the  financial  loss  he  sustains  by  reason  of  his  receiving 
less  than  a  just  wage,  but  it  does  not  cure  the  evil — it 
merely  emphasizes  its  existence. 

Bondholders  and  Profits. 

"The  relative  positions  of  bondholders  and  stock- 
holders of  a  corporation  are  analogous  to  those  of  em- 
ployer and  employee,  so  far  as  the  payment  of  expenses 
and  distribution  of  earnings  is  concerned. 

"Bond  and  stockholders  both  invest  capital  in  the  en- 
terprise. The  bondholder  is  entitled  to  four,  five  or  six 
per  cent,  as  the  case  may  be,  before  the  stockholder  is  en- 
titled to  receive  anything.  The  bondholder  has  certain- 
ty of  income  and  security  of  principal.  With  this  pref- 
erence his  rights  end.  He  is  not  entitled  to  participate 
in  any  profits — they  belong  to  the  stockholders.  For  a 
greater  risk  they  are  compensated  by  tlie  chance  or  pros- 
pect of  a  greater  return. 

"There  are  no  profits  for  the  stockholders  until  the 
bondholders  are  paid  and  there  are  no  profits  for  the 
employer  until  the  employees  are  paid. 


260 

''What  security  bolder  or  economist  ever  had  the 
temerity  to  suggest  that  after  a  particularly  prosperous 
year  the  stockholders  should  indulge  in  profit  sharing 
with  the  first  mortgage  bondholders'?  And  yet  there 
would  be  just  as  much  reason  for  such  a  suggestion  as 
there  is  in  the  contention  that  the  employer  should  share 
his  profits  with  the  employee  after  the  latter  has  been 
paid  a  just  wage. 

* '  What  constitutes  a  just  wage  is  a  problem  for  settle 
ment  between  employer  and  employee,  w^hich  profit  shar- 
ing in  no  way  helps  to  solve,  since  the  net  result  to  the 
worker  is  the  same  whether  his  earnings  reach  him  under 
the  name  of  part  wages  and  part  profits  or  as  all  wages. 

**  Modern  industry  has  passed  the  point  where  the 
laborer  individually  can  deal  effectively  with  the  employ- 
er of  labor,  and  secure  for  himself  that  just  wage  and  the 
proper  surroundings  to  which  he  is  entitled.  Generally 
speaking,  this  can  be  secured  only  through  the  instru- 
mentality of  organized  labor.  In  view  of  the  careful 
study  which  labor  leaders  have  given  to  the  various  forms 
of  profit  sharing  which  have  been  put  in  operation  in 
this  country,  the  attitude  of  the  labor  organizations  on 
this  subject  is  entitled  to  serious  consideration.  It  will 
be  seen  from  their  views  hereinbefore  expressed,  that 
the  trade  unions  are  unanimous  in  the  opinions  that  prof- 
it sharing  is  not  only  detrimental  to  the  best  interests  of 
organized  labor,  but  that  if  generally  adopted  would 
threaten  the  very  existence  of  the  unions  themselves. 
And  if  this  is  to  be  the  final  result  the  question  arises, 
is  profit  sharing  worth  the  price?  This  question  is  not 
prompted  by  a  consideration  of  the  unions  as  organiza- 
tions, but  by  a  consideration  of  what  the  future  holds  in 
store  for  labor  as  a  class  if  the  union's  power  for  good 
is  to  be  abolished.  With  the  collective  bargaining  power 
of  the  labor  union  ended,  will  the  present  rate  of  wages 
be  maintained;  or,  will  the  eight  hour  day  give  way  to 
the  nine  and  ten  hour  dav,  and  will  the  condition  of  the 
workman  gradually  return  to  that  which  existed  before 


261 

trade  unionism  brought     about     shorter  hours,  higher 
wages  and  better  living  conditions? 

''While  it  is  undoubtedly  true  that  in  some  instances 
profit  sharing  has  proven  beneficial  to  employer  and  em- 
ployee alike,  a  close  study  of  all  the  important  experi- 
ments shows  that  it  does  not  reach  or  beneficially  affect 
the  rank  and  file  of  labor.  All  things  considered,  I  am 
led  to  the  conclusion  that  if  generally  applied  the  gain, 
if  any,  would  be  more  than  offset  by  the  loss  resulting 
from  the  consequent  disintegration  of  the  labor  unions." 


^^TEjS?^JB^>»f 


H.  TYRREL,  PRINTER 
209-8  FULTON  8T 
NEW  YORK 


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